The paradigm sways: Macroeconomics turns to history

• Date: 01 December 2017
• DOI: http://doi.org/10.1111/infi.12114
• Author: David A. Westbrook
• Published date: 01 December 2017

DOI: 10.1111/infi.12114

BOOK REVIEW

The paradigm sways: Macroeconomics turns to

history

David A. Westbrook

University at Buffalo Law School, State University of New York

THE EURO AND THE BATTLE OF IDEAS

Markus K. Brunnermeier, Harold James, and Jean-Pierre Landau

Princeton University Press, Princeton, New Jersey, 2016

THE SHIFTS AND THE SHOCKS: WHAT WE'VE LEARNED—AND HAVE STILL TO

LEARN—FROM THE FINANCIAL CRISIS

Martin Wolf

Penguin Random House, New York, 2014 and 2015

THE END OF ALCHEMY: MONEY, BANKING, AND THE FUTURE OF THE GLOBAL

ECONOMY

Mervyn King

W.W. Norton, New York, 2016

These three books provide excellent analyses of the Global Financial Crisis and its second act, the

Eurozone Crisis (jointly, the GFC). In The Euro and the Battle of Ideas, Markus Brunnermeier, Harold

James, and Jean-Pierre Landau (collectively ‘BJL’) show how the Eurozone Crisis reveals deep-seated

and sometimes incompatible European traditions in economic policy. They label the two approaches

‘French’and ‘German’.InThe Shifts and the Shocks, Martin Wolf uses the history of the GFC to

analyse the global economy and highlight its vulnerabilities. In The End of Alchemy, Mervyn King

argues that the GFC challenged basic understandings of money and finance, and proposes fundamental

banking reforms.

Given the magnitude of the GFC, new thinking might have been expected. Historian of science

Thomas Kuhn called the failure of an explanatory model, and the emergence of a new framework that

better fits the data, a ‘paradigm shift’(Kuhn, 1970). These three books suggest that a paradigm shift

may be under way in macroeconomics. The new perspective emphasizes historically based

understandings in both economic policy-making and markets. The emergence of such a paradigm

would be an exciting development for the discipline.

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THE EURO AND THE BATTLE OF IDEAS

In The Euro and the Battleof Ideas, BJL chronicle the EurozoneCrisis as a clash of economic traditions.

They begin in 2010 with European efforts to respond to the discovery of financial stress in Greece.

European financialinstitutions and governments were highly leveragedand deeply interconnected, and

International Finance. 2017;20:317–324. wileyonlinelibrary.com/journal/infi © 2017 John Wiley & Sons Ltd

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