Straightjacket Ideology: The Crisis of Macroeconomics

By André Lara Resende

In his groundbreaking book, Straightjacket Ideology: The Crisis of Macroeconomics, André Lara Resende offers a scathing critique of the current state of macroeconomic thought and policy. Resende argues that the prevailing orthodoxy, based on the efficient markets hypothesis and the rational expectations theory, has led to a series of disastrous policy failures, including the financial crisis of 2008.

The Efficient Markets Hypothesis

The efficient markets hypothesis (EMH) is the belief that financial markets are always efficient and that all available information is already reflected in asset prices. This means that it is impossible to consistently outperform the market by trading on publicly available information.

Resende argues that the EMH is a flawed theory that has led to a number of harmful policy decisions. For example, the belief that markets are always efficient has led policymakers to underestimate the risks associated with financial bubbles, such as the housing bubble that led to the 2008 financial crisis.

The Rational Expectations Theory

The rational expectations theory (RET) is the belief that people form their expectations about the future based on all available information and that these expectations are, on average, correct. This means that policymakers cannot systematically fool people by manipulating economic data or making false promises.

Resende argues that the RET is also a flawed theory that has led to a number of harmful policy decisions. For example, the belief that people always have rational expectations has led policymakers to underestimate the impact of psychological factors on economic behavior, such as the fear and greed that can drive financial bubbles.

The Crisis of Macroeconomics

The combination of the EMH and the RET has led to a crisis of macroeconomics. Policymakers who believe in these theories have been unable to prevent or mitigate the financial crisis of 2008 and the subsequent Great Recession.

Resende argues that we need a new approach to macroeconomics that is based on a more realistic understanding of how financial markets and economies work. He proposes a number of reforms, including:

• Reforming the financial system to make it more resilient to shocks.
• Adopting a more active role in managing the economy, including using fiscal and monetary policy to stimulate growth and prevent recessions.
• Encouraging research on new economic theories that can better explain the real world.

Conclusion

Straightjacket Ideology: The Crisis of Macroeconomics is a must-read for anyone who wants to understand the current state of the global economy. Resende's incisive analysis of the flaws in conventional macroeconomic thought provides a roadmap for a more sustainable and prosperous future.

Why You Should Buy This Book

Straightjacket Ideology: The Crisis of Macroeconomics is a powerful and provocative book that will change the way you think about the economy. If you are interested in learning more about the causes of the financial crisis and the Great Recession, or if you are simply looking for a better understanding of how the global economy works, then this book is for you.

Here are a few reasons why you should buy Straightjacket Ideology: The Crisis of Macroeconomics:

• It is a well-written and engaging book that is accessible to readers of all levels.
• It provides a comprehensive and insightful analysis of the current state of macroeconomic thought and policy.
• It offers a number of concrete proposals for reforming the financial system and the economy.
• It is a must-read for anyone who wants to understand the challenges facing the global economy in the 21st century.

Don't miss out on this important book. Order your copy of Straightjacket Ideology: The Crisis of Macroeconomics today!