I liked her comment about mainstream economics' bias toward maximizing "efficiency". It definitely felt like eliminating sources of "deadweight loss" was the p

I liked her comment about mainstream economics' bias toward maximizing "efficiency". It definitely felt like eliminating sources of "deadweight loss" was the primary goal of introductory microeconomics. Nevertheless, most societies today have substantial tax rates, suggesting that there are other priorities than efficiency in the real world. Interestingly, though, mainstream macroeconomics would probably have predicted (and could have been used to prevent) the 2008 crisis if it had actually been used. Instead, well-positioned economists supported policies that ignored the rapid growth of a housing bubble and the fact that it was driving a substantial portion of total economic output. I would not, for example, call the analysis in Baker's 2002 paper [1] a heterodox analysis, indeed, it was pretty mainstream. It was, however, contrary to the pronouncements of the Federal Reserve. 1. http://cepr.net/publications/reports/the-run-up-in-home-prices-is-it-real-or-is-it-another-bubble http://cepr.net/publications/reports/the-run-up-in-home-pric...