Harry "Keynes" Potter and the Mindless Automatons
Via The American Magazine, Thomas J. Sargent and Christopher A. Sims won the Nobel prize in economics:
The state of the economy was set by the intersection of aggregate demand and aggregate supply curves. An adept policy maker could, by pulling the right levers and twisting the right knobs, shift these curves and thereby set the economy on the proper course. Implicitly, to such a policy mastermind, the economy was populated with individuals who acted in reliable, predictable ways.Some are accusing Sargent and Sims of finally recognizing that people aren't rational. This is not what they mean: the old Keynesian model did not utilize rational actors, but robots who acted according to simplified models without self-correcting behavior. In fact, some people are ahead of the curve, predicting the economists, and some people, well, some few people never learn. People are not perfectly rational, but neither are they mindless automatons.