Clinical macroeconomics and differential diagnosis

Abstract

Abstract The 2008 financial crisis laid bare several deficiencies of mainstream macroeconomic analysis, most importantly the failure to engage in systematic differential diagnosis. Mainstream macroeconomics, following Keynes, has unduly privileged aggregate demand shocks in both analysis and policy prescription, whereas actual macroeconomic crises emerge from a much more diverse set of causes: demand, supply, panic, coordination failures, and, of course, even pandemic disease. The systematic application of differential diagnosis of underlying sources of shocks would improve system resilience and policy responses.