I have written a piece over at TCS Daily that discusses macroeconomic theory, policy, and the financial crisis. Here is a tease:
The conventional wisdom on the current financial crisis is that macroeconomic theory has little to say. I am not sure where this idea originated, but there is much that can be explained from existing theory especially in regards to policy. The work of Robert Barro, Charles Plosser and John Long as well as Nobel laureates such as Milton Friedman, Franco Modigliani, Finn Kydland, and Ed Prescott have much to say about the impact of macroeconomic policy.
Unfortunately, with a few notable exceptions, the work of these economists has received scant attention during the current crisis. Nonetheless, their work remains important in explaining the futility of much of the current policy prescriptions. Equally disturbing is the return of self-professed Keynesians with policy prescriptions that are wholly inconsistent with both Keynes and modern macroeconomic theory.
Read the whole thing.