Abstract
The 2008 international financial crisis triggered retrospection on both theory and policy, reaching a macroeconomic consensus that the financial system plays an important role in the macro economy and macroeconomic theory must be restructured to incorporate endogenous financial factors. Reflecting on the inherent flaws of traditional mainstream economics, this paper puts forward a ?macrofinance? proposition as a new paradigm for macro financial analysis. As a scientific methodology based on systematic logic, the major feature of the macrofinance framework is that we must analyze the financial system as a core part of a complete and endogenous analytical framework, instead of only focusing on the money or credit. The goal of ?macrofinance? is to return to scientific economic methodologies by analyzing the inherent laws of modern financial systems to set up a comprehensive theoretical framework that unifies the financial sector with the real economy and combines theory and policy practice.
Highlights
A General Theory of MacrofinanceSummary: The 2008 international financial crisis triggered retrospection on both theory and policy, reaching a macroeconomic consensus that the financial system plays an important role in the macro economy and macroeconomic theory must be restructured to incorporate endogenous financial factors
In 1906, Alfred Marshall famously wrote about his skepticism regarding the use of mathematics in economics
Theories about microfinance and macrofinance are no longer isolated from one another, finance and the real economy along with internal and external financial development receive unified recognition, and in the space between theory and practice a logical link is created for the combination of general laws and “national endowment”
Summary
Summary: The 2008 international financial crisis triggered retrospection on both theory and policy, reaching a macroeconomic consensus that the financial system plays an important role in the macro economy and macroeconomic theory must be restructured to incorporate endogenous financial factors. “The weak and all too slowly growing empirical foundations clearly cannot support the proliferating superstructure of pure, or should I say, speculative economic theory. By the time it comes to interpretations of the substantive conclusions, the assumptions on which the model has been based are forgotten. “The economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.” These quotes are meant to remind us of the often-made-mistake of putting too much faith in mathematics which seems to be the name of the game nowadays. It serves as the link between the conceptual discussion of the earlier part and the critical look at the changed corporate landscape that concludes this essay
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