So, Dani, what was *your* clever addition to economics that landed your nice position at the KSG? As for Reinhart/Rogoff, most people forget that their paper was and is still a *working* paper, not a published one. But, alas, everybody had to jump all over them, right?
Raghuram Rajan's article sounds awfully close to me to a defense of Austrian Economics, a la Ludwig von Mises. Even though Mr. Rajan might not want to portray it that way. [Austrian Econ is not all too popular these days in the venerable halls of the top departments of Economics, where Mr. Rajan circulates.]
Lord Skidelsky says at the end of the article "There is much greater scope for fiscal stimulus to boost growth...". Really? Greece has a debt to GDP ratio of close to 200%. More scope for borrowing money? How about other countries, like Italy or Portugal with close to 100% of ratios. The good Lord seems to forget that the Eurozone countries do not print their own money. I guess the states in the United States which the 1840s went bankrupt at the time had it all wrong. They should have borrowed even more, for "fiscal stimulus" to "enhance growth". [Who would have loaned them the money? That question, of course, goes unanswered by Lord Skidelsky and others.] And such thinking passes for high quality economics being taught at prestigious universities?
I find this article astounding, especially coming from an ex-Director of the London School of Economics. Evidently, this gentleman never picked up a decent book on Economic Theory. Makes me wonder what he teaches in Paris, to his unsuspecting students. Davies makes no effort to explain the financial crisis, just badmouths people who made huge contributions to Econ and Finance; contributions that Mr. Davies does not come even close by a long shot of having made. Mr. Davies says nothing about the institutional framework in the US, the prevalent laws, Fannie and Freddie and their implicit government guarantee, the loose monetary policy of the early 2000s, etc etc all of which made the crisis possible. In other words, the story is much, much more complicated than Mr. Davies presents it. He being a former Director of the LSE should be able to do much better, especially if he teaches this stuff in Paris, but does not. Yes, Mr. Davies, there were people telling policymakers that the financial markets were heading to a crisis (Raghuram Rajan comes to mind). And yes, they were using conventional Economics models, those that are in the journals and textbooks. In summary, I expect much better from a former Director of the LSE; but who knows, maybe it is a sign of how Economics is unfortunately taught in the UK right now.
This is the final triumph of Margaret Thatcher. The Iron Lady always opposed a "Euro-style" type of European unification, but favored a European Economic Community of trading nations. She used to say "the Germans will be Germans always, the Italians will be Italians, and the British will be British", signifiying that Europe should be a huge customs union with free trade and free flow of labor, but still with national policies and national governments. She was right, it seems.