ABSTRACT
In his widely reported testimony to the US Congress in October 2008, Alan Greenspan, the former head of the Federal Reserve, admitted a ‘flaw’ in the economic model of the world in which he had believed (Andrews, New York Times, 2008). Greenspan's model was what we call the standard paradigm in economics and finance. This view of the world was more or less the same as the one held by almost all other central bankers and regulators globally, as well as being the dominant paradigm reflecting the beliefs of economists of conservative and liberal persuasions. Thus, unaware of the impending global financial crisis at the time of his writing Blanchard (2008: 100) declares: ‘The state of macro[economics] is good.’ and Krugman (2007) writes:
… since the early 1980s the Federal Reserve and its counterparts in other countries have done a reasonably good job.
