IMF Chief Economist Olivier Blanchard writes in the latest edition of Finance & Development about the “dark corners” of macroeconomics, and the need to keep clear of them. Macroeconomics in the last 30 years, for reasons both internal and external to the profession, had largely ignored these corners, much to its detriment in the financial crisis of 2008. Danger, it turned out, was much closer at hand that economists expected, and the result was that, when the crisis came, macroeconomists did not have a good explanation, nor a ready plan of action. Today, research in macroeconomics and finance is becoming more coordinated, in the hopes of avoiding future crises.
On the other hand, one might wonder, given the persistence of unemployment and the lack of growth in developed states, coupled with the continuation of austerity policies in the European Union and the US, is it the prevalence of darkness that is the problem, or rather the lack of adequate light? Is macroeconomics fundamentally suited to its task, or should we engage in a critique of its basic underpinnings?