Sumitra Shah wrote:

Professor John H. Cochrane:

>"Of course we are not all Keynesians now. Economics is, or at least 
>tries to be, a science, not a religion. Economic understanding does 
>not lie in a return to eternal verities written down in long , 
>convoluted old books, or in the wisdom of fondly remembered sages, 
>whether Keynes, Friedman or even Smith himself. Economics is a live 
>and active discipline, and it is no disrespect to Keynes to say that 
>we have learned a lot in 70 years. Let us stop talking about labels 
>and appealing to long dead authorities. Let us instead apply the 
>best of modern economics to talk about what has a chance of working 
>in the present situation and why. "


What, then, is "economic understanding," one might ask Professor 
Cochrane? And what have WE learned? And in what sense does "it" 
"work?" It seems to me that what "we" have NOT learned is that we 
cannot depend on the government to remove the uncertainty of lending 
(FDIC) and that we cannot depend on the FED to control the quantity 
of money by means of a fractional reserve system and financial 
institution regulation. Yet these are precepts that every modern 
macroeconomic textbook takes for granted. And the modern economics 
textbook started with the interpreters of Keynes. What "we all are," 
at least insofar as macroeconomics is concerned, is lost, it seems to me.

Pat Gunning