To paraphrase Isaac Newton, macroeconomists can calculate the motions of a lonely rational agent but not the madness of the crowds. Yet if macroeconomics wants to become relevant again, its practitioners will have to start calculating this madness. It is going to be difficult, but that is no excuse not to try.
Great intellectual history of the 2007-2009 crisis by Berkeley economist and blogger extraordinaire Brad DeLong, invaluable if you want to follow the current nasty spat between macroeconomists. If I were to sum up and overly simplify this epic feud, it would go something like this:
The current economic crisis has followed Keynesian theory to a T and those economists who have either never learned Keynes (because their professors told them it was a discredited theory) or spent their careers ridiculing Keynes are having a difficult time, to say the least, accepting, let alone graciously accepting, that they were wrong.
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