by Richard Thaler

I recently had the pleasure of reading Justin Fox’s new book The Myth of the Rational Market . It offers an engaging history of the research that has come to be called the “efficient market hypothesis”. It is similar in style to the classic by the late Peter Bernstein, Against the Gods. All the quotes in this column are taken from it. The book was mostly written before the financial crisis. However, it is natural to ask if the experiences over the last year should change our view of the EMH. Continue reading "Markets can be wrong and the price is not always right"

By Shankar Acharya

In recent years, the rise of China and India has become a salient feature of the global economic landscape. Conferences and books have proliferated with titles such as “China and India Rising” and “Dancing with Giants”. Although individual contributions have often delineated carefully the differing paths taken by these two populous Asian nations, there has been a general tendency to lump the two countries together in discussions of global economic issues ranging from international trade to climate change. Continue reading "Asia rises, one economic giant at a time"

By Glenn Hubbard

This week the United Nations reported that the recession has created a $4.8bn (£3bn, €3.4bn) shortfall in its 2009 aid programmes – more than half the $9.5bn it seeks. On the one hand, that is bad, because the UN does much valuable humanitarian work. On the other hand, financial constraints may force the UN to rethink the portion of its aid aimed at economic development. The UN continues to fund government and non-governmental organisations to run economic development projects. But that is not how to end poverty: only the local business sector does that. Continue reading "Only local business can end global poverty"

If the government of the UK wishes to find a suitable motto, it should adopt the advice of a great Scot. “Great Britain should,” wrote Adam Smith in The Wealth of Nations, “…endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.” Smith offers wise counsel. The country’s circumstances are more mediocre than imagined two years ago. The question is how to respond. Continue reading "Adapting to Britain’s mediocre prospects"

What will the world economy – indeed, the world – look like after the financial crisis is over? Will this prove to be a mere blip or something more fundamental? Much of the answer will be provided by the performance of the two Asian giants, China and India. Rightly or wrongly, it is widely accepted that China will continue to grow very rapidly. But what is the likely future for India? Continue reading "What India must do if it is to be an affluent country"

Martin Wolf and Jeffrey Sachs are among those to have joined the FT’s debate on aid. Visit the Arena blog to read their contributions.

Did inflation targeting fail? Central banks have mostly escaped blame for the crisis. Do they deserve to do so?

Just over five years ago, Ben Bernanke, now chairman of the Federal Reserve, gave a speech on the “Great Moderation” – the declining volatility of inflation and output over the previous two decades. In this he emphasised the beneficial role of improved monetary policy. Central bankers felt proud of themselves. Pride went before a fall. Today, they are struggling with the deepest recession since the 1930s, a banking system on government life-support and the danger of deflation. How can it have gone so wrong? Continue reading "Central banks must target more than just inflation"

The UK has followed the US and Japan into “unconventional monetary policy”. Meanwhile, Mervyn King, governor of the Bank of England warns the UK government of the dangers of further discretionary fiscal stimulus. Yet what are the implications of the policies followed by central banks? Are these not the big threat to monetary stability? Continue reading "Credibility is key to policy success"