By William K. Black
December 19, 2017 Bloomington, MN
Lawrence J. Christiano was the lead author of the article announcing the Dilettante doctrine that I discussed in the first column in this series. His ‘dilettante article’ claimed that modern macro got the last crisis so wrong because it ignored the ‘shadow’ financial sector. I have found a 2008 article by him and two Minneapolis Fed co-authors that illustrates modern macro’s blindness to the shadow financial sector. The article is entitled “Facts and Myths about the Financial Crisis of 2008” and the first footnote says that they wrote the article based on information available on October 25, 2008. The purpose of the article was to demand that proponents of fiscal and monetary stimulus prove a specific “market failure” justifying stimulus. Christiano and his co-authors agree that the Nation is in a “financial crisis” and that it could lead to a serious recession, but see no reason for the government to act.