Big thinkers still stumped on global economic crisis
More than five years after the onset of the current economic crisis economists continue to be divided on how it can be fixed. An International Monetary Fund (IMF) hosted conference on rethinking economic policy, organised by four prominent economist including the Olivier Blanchard, the IMF's own chief economist, produced no convincing answer.
Nobel Prize winner George Akerlof of the University of California likened the uncertainty over the economy to a cat climbing a huge tree. It should have come down by now, but it hasn’t. The problem according to another Nobel Prize winner, Joseph Stiglitz is that "there is no good economic theory that explains why the cat is still up the tree".
Allan Meltzer of Carnegie Mellon University in Pittsburgh Pennsylvania suggested that the significant amount of stimulus had had very little effect. There is also debate about what should be the aim of monetary policy, and whether this should be changed. Recognising that inflation targets had gained widespread acceptance ahead of the crisis, but maybe this is not enough.
Stiglitz suggested that the crisis was itself evidence that economies are not necessarily stable or self-correcting. Blanchard’s conclusion was that “We don’t have a sense of our final destination... Where we end I really do not have much of a clue.”
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