Summary |
The economic crisis is also a crisis for economic theory. Most analyses of the evolution of the crisis invoke three themes- contagion, networks and trust-yet none of these play a major role in standard macroeconomic models. What is needed is a theory in which these aspects are central. The direct interaction between individuals, firms and bank does not simply produce imperfections in the functioning of the economy but is the very basis of the functioning of a modern economy. This book suggests a way of analyzing the economy which takes this point of view.
This book provides examples where this can clearly be seen. The examples range from Schelling’s model of segregation to contributions to public goods, the evolution of buyer-seller relations in fish markets to financial models based on the foraging behaviour of ants.
The message of the book is that coordination rather than efficiency is the central problem in economics.
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