From this morning's Washington Post:
"Before the crisis, we had converged on a beautiful construction" to explain how markets could protect themselves from harm, said Olivier Blanchard, an economics counselor at the International Monetary Fund. "But beauty is not synonymous with truth."
That beautiful construction held that central banks need only control inflation and that markets would virtually govern themselves with a light touch from government. It largely blinded mainstream economists from foreseeing the ugly depths of the 2008 downturn.
The money quote from Blanchard echoes this Krugman essay from 2009. It's a reminder that economists are still deeply uncertain about key macroeconomic questions.
A bunch of big-name economists and policymakers are converging at the IMF this week to try to, in Blanchard's words, "take stock, and draw a first set of lessons" from the crisis.
There is a broad shift underway toward more intervention by regulators and central banks — to try to respond the growth of bubbles, for example, and regulate the flow of money into and out of developing economies.
But at this point, there may be more questions than consensus. From the WaPo:
"We realize that many of the things we thought with certainty we cannot anymore," said Kemal Dervis, head of the global economics program at the Brookings Institution and a longtime World Bank and Turkish government official. "But from there to an overall consensus on how monetary and fiscal and growth policies are linked - we are very far off."