The most interesting moment at a recent conference held in Bretton Woods, New Hampshire – site of the 1945 conference that created today’s global economic architecture – came when Financial Times columnist Martin Wolf quizzed former United States Treasury Secretary Larry Summers, President Barack Obama’s ex-assistant for economic policy. '[Doesn’t] what has happened in the past few years,” Wolf asked, “simply suggest that [academic] economists did not understand what was going on?'
"Here is the most interesting part of Summers’ long answer: 'There is a lot in [Walter] Bagehot that is about the crisis we just went through. There is more in [Hyman] Minsky, and perhaps more still in [Charles] Kindleberger.' That may sound obscure to a non-economist, but it was a devastating indictment....
"...He talked about 'the revolution in finance as it was realized that asset prices show large volatility that does not reflect anything about fundamentals,' but added that 'macroeconomics [did not] keep up with [this] revolution.' As a result, 'to the great detriment of contemporary macroeconomics,' his fellow economists did not understand asset prices, manias, panics, and liquidity...."
Read the rest: Economics in Crisis
Maybe Prof. DeLong will wake up to MMT and learn that some "heterodox economists" have been working in this field for decades.