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“A small cloud, no bigger than a man’s hand…” 

As the global economy zigs; “modern macro” zags.

Posted in 2007-08 Financial Crisis, History of economics Tagged with: , , , , ,

The prophet Elijah’s most famous forecast (I Kings 18:44) – the sudden storm, deduced from inconspicuous change, that ended a three-year drought – became a cliché in business journalism in the 1970s, as one industry after another was overtaken by rapid change that it hadn’t anticipated. There were no such metaphors in economics – an outgrowth of the conviction summed up by Alfred Marshall’s motto, Natura non facit saltum – Nature makes no leaps. For economists educated in marginalism and the differential calculus, it was an entirely natural way of thinking of the world. Thus the news from China barely