After the financial crisis erupted, the Queen famously asked on a visit to the London School of Economics why the problems hadn’t been spotted in advance. The true answer — one which the Queen presumably was not supplied with — is that economists had developed a deeply flawed paradigm for how the economy operates. Economists posited a world of equilibrium and rationality, in which money and the operations of finance were essentially inert. This academic model turned out to be far removed from reality.
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