Ever since the financial crisis has started, mainstream neo-liberal economics is on the backfoot. The prophets of free market neo-liberal economics and prophecies of capitalism getting rid of the problem of boom and the bust have been proved wrong by the advent of the global financial crisis. It is however not the case that mainstream economics has committed a mistake in not being able to anticipate the crisis. Rather the point is that mainstream economics lack the analytical framework to understand recessions and depressions under capitalism.
In this article, Paul Krugman exposes the vacuity of current trends in mainstream economics theory.