From Crisis to Confidence: Macroeconomics after the Crash

Abstract

Some would argue that the financial crash revealed failings in the discipline of economics as well as in the financial system. The main post-war approaches to economics, based on neo-classical and new- Keynesian principles and modelling, failed to anticipate the crash or the depth of the slump that followed. In this monograph, Roger Koppl, drawing on ideas from the Austrian school and the work that has been done on policy uncertainty argues that the missing ingredient in many economic theories is a proper theory of confidence. The author is not only able to make sense of Keynes' animal spirits, but also demonstrates how Big Players - often, though not always, government agencies - can undermine confidence, reduce long-term investment, increase speculation and reduce economic growth over a long period of time. From crisis to confidence not only describes the process through which the economy must go through before a full recovery after the financial crash, it also describes the journey that must be travelled by the discipline of economics. As economics students and other commentators question post-war macro-economics, Roger Koppl provides some of the answers needed to understand the long slump after the financial crash. A theory of confidence is needed in any economic framework that is to explain one of the most important periods in modern economic history.