How_RRQ Did_VDD Economists_NN2 Get_VV0 It_PPH1 So_RG Wrong_JJ ?_? 
It_PPH1 's_VBZ hard_JJ to_TO believe_VVI now_RT ,_, but_CCB not_XX long_RR ago_RA economists_NN2 were_VBDR congratulating_VVG themselves_PPX2 over_II the_AT success_NN1 of_IO their_APPGE field_NN1 ._. 
Those_DD2 successes_NN2 --_NN1 or_CC so_CS they_PPHS2 believed_VVD --_NN1 were_VBDR both_RR theoretical_JJ and_CC practical_JJ ,_, leading_VVG to_II a_AT1 golden_JJ era_NN1 for_IF the_AT profession_NN1 ._. 
On_II the_AT theoretical_JJ side_NN1 ,_, they_PPHS2 thought_VVD that_CST they_PPHS2 had_VHD resolved_VVN their_APPGE internal_JJ disputes_NN2 ._. 
Thus_RR ,_, in_II a_AT1 2008_MC paper_NN1 titled_VVN "_" The_AT State_NN1 of_IO Macro_NN1 "_" (_( that_REX21 is_REX22 ,_, macroeconomics_NN2 ,_, the_AT study_NN1 of_IO big-picture_JJ issues_NN2 like_II recessions_NN2 )_) ,_, Olivier_NP1 Blanchard_NP1 of_IO M.I.T._NP1 ,_, now_RT the_AT chief_JJ economist_NN1 at_II the_AT International_JJ Monetary_JJ Fund_NN1 ,_, declared_VVD that_CST "_" the_AT state_NN1 of_IO macro_NN1 is_VBZ good_JJ ._. "_" 
The_AT battles_NN2 of_IO yesteryear_NNT1 ,_, he_PPHS1 said_VVD ,_, were_VBDR over_RP ,_, and_CC there_EX had_VHD been_VBN a_AT1 "_" broad_JJ convergence_NN1 of_IO vision_NN1 ._. "_" 
And_CC in_II the_AT real_JJ world_NN1 ,_, economists_NN2 believed_VVD they_PPHS2 had_VHD things_NN2 under_II control_NN1 :_: the_AT "_" central_JJ problem_NN1 of_IO depression-prevention_NN1 has_VHZ been_VBN solved_VVN ,_, "_" declared_VVD Robert_NP1 Lucas_NP1 of_IO the_AT University_NN1 of_IO Chicago_NP1 in_II his_APPGE 2003_MC presidential_JJ address_NN1 to_II the_AT American_JJ Economic_JJ Association_NN1 ._. 
In_II 2004_MC ,_, Ben_NP1 Bernanke_NP1 ,_, a_AT1 former_DA Princeton_NN1 professor_NN1 who_PNQS is_VBZ now_RT the_AT chairman_NN1 of_IO the_AT Federal_JJ Reserve_JJ Board_NN1 ,_, celebrated_VVD the_AT Great_JJ Moderation_NN1 in_II economic_JJ performance_NN1 over_II the_AT previous_JJ two_MC decades_NNT2 ,_, which_DDQ he_PPHS1 attributed_VVD in_RR21 part_RR22 to_II improved_JJ economic_JJ policy_NN1 making_VVG ._. 
Last_MD year_NNT1 ,_, everything_PN1 came_VVD apart_RL ._. 
Few_DA2 economists_NN2 saw_VVD our_APPGE current_JJ crisis_NN1 coming_VVG ,_, but_CCB this_DD1 predictive_JJ failure_NN1 was_VBDZ the_AT least_DAT of_IO the_AT field_NN1 's_GE problems_NN2 ._. 
More_RGR important_JJ was_VBDZ the_AT profession_NN1 's_GE blindness_NN1 to_II the_AT very_JJ possibility_NN1 of_IO catastrophic_JJ failures_NN2 in_II a_AT1 market_NN1 economy_NN1 ._. 
During_II the_AT golden_JJ years_NNT2 ,_, financial_JJ economists_NN2 came_VVD to_TO believe_VVI that_CST markets_NN2 were_VBDR inherently_RR stable_JJ --_NN1 indeed_RR ,_, that_CST stocks_NN2 and_CC other_JJ assets_NN2 were_VBDR always_RR priced_VVN just_RR right_JJ ._. 
There_EX was_VBDZ nothing_PN1 in_II the_AT prevailing_JJ models_NN2 suggesting_VVG the_AT possibility_NN1 of_IO the_AT kind_NN1 of_IO collapse_NN1 that_CST happened_VVD last_MD year_NNT1 ._. 
Meanwhile_RR ,_, macroeconomists_NN2 were_VBDR divided_VVN in_II their_APPGE views_NN2 ._. 
But_CCB the_AT main_JJ division_NN1 was_VBDZ between_II those_DD2 who_PNQS insisted_VVD that_DD1 free-market_NN1 economies_NN2 never_RR go_VV0 astray_JJ and_CC those_DD2 who_PNQS believed_VVD that_CST economies_NN2 may_VM stray_VVI now_RT and_CC then_RT but_CCB that_DD1 any_DD major_JJ deviations_NN2 from_II the_AT path_NN1 of_IO prosperity_NN1 could_VM and_CC would_VM be_VBI corrected_VVN by_II the_AT all-powerful_JJ Fed_VVD ._. 
Neither_DD1 side_NN1 was_VBDZ prepared_VVN to_TO cope_VVI with_IW an_AT1 economy_NN1 that_CST went_VVD off_II the_AT rails_NN2 despite_II the_AT Fed_VVN 's_VBZ best_JJT efforts_NN2 ._. 
And_CC in_II the_AT wake_NN1 of_IO the_AT crisis_NN1 ,_, the_AT fault_NN1 lines_NN2 in_II the_AT economics_NN1 profession_NN1 have_VH0 yawned_VVN wider_JJR than_CSN ever_RR ._. 
Lucas_NP1 says_VVZ the_AT Obama_NP1 administration_NN1 's_GE stimulus_NN1 plans_NN2 are_VBR "_" schlock_NN1 economics_NN1 ,_, "_" and_CC his_APPGE Chicago_NP1 colleague_NN1 John_NP1 Cochrane_NP1 says_VVZ they_PPHS2 're_VBR based_VVN on_II discredited_JJ "_" fairy_NN1 tales_NN2 ._. "_" 
In_II response_NN1 ,_, Brad_NP1 DeLong_NN1 of_IO the_AT University_NN1 of_IO California_NP1 ,_, Berkeley_NP1 ,_, writes_VVZ of_IO the_AT "_" intellectual_JJ collapse_NN1 "_" of_IO the_AT Chicago_NP1 School_NN1 ,_, and_CC I_PPIS1 myself_PPX1 have_VH0 written_VVN that_CST comments_NN2 from_II Chicago_NP1 economists_NN2 are_VBR the_AT product_NN1 of_IO a_AT1 Dark_JJ Age_NN1 of_IO macroeconomics_NN2 in_II which_DDQ hard-won_JJ knowledge_NN1 has_VHZ been_VBN forgotten_VVN ._. 
What_DDQ happened_VVD to_II the_AT economics_NN1 profession_NN1 ?_? 
And_CC where_RRQ does_VDZ it_PPH1 go_VVI from_II here_RL ?_? 
As_CSA I_PPIS1 see_VV0 it_PPH1 ,_, the_AT economics_NN1 profession_NN1 went_VVD astray_RR because_CS economists_NN2 ,_, as_CSA a_AT1 group_NN1 ,_, mistook_VVD beauty_NN1 ,_, clad_VVN in_II impressive-looking_JJ mathematics_NN1 ,_, for_IF truth_NN1 ._. 
Until_CS the_AT Great_JJ Depression_NN1 ,_, most_DAT economists_NN2 clung_VVN to_II a_AT1 vision_NN1 of_IO capitalism_NN1 as_II a_AT1 perfect_JJ or_CC nearly_RR perfect_JJ system_NN1 ._. 
That_DD1 vision_NN1 was_VBDZ n't_XX sustainable_JJ in_II the_AT face_NN1 of_IO mass_JJ unemployment_NN1 ,_, but_CCB as_CSA memories_NN2 of_IO the_AT Depression_NN1 faded_VVD ,_, economists_NN2 fell_VVD back_RP in_II love_NN1 with_IW the_AT old_JJ ,_, idealized_VVD vision_NN1 of_IO an_AT1 economy_NN1 in_II which_DDQ rational_JJ individuals_NN2 interact_VV0 in_II perfect_JJ markets_NN2 ,_, this_DD1 time_NNT1 gussied_VVD up_RP with_IW fancy_JJ equations_NN2 ._. 
The_AT renewed_JJ romance_NN1 with_IW the_AT idealized_JJ market_NN1 was_VBDZ ,_, to_TO be_VBI sure_JJ ,_, partly_RR a_AT1 response_NN1 to_II shifting_VVG political_JJ winds_NN2 ,_, partly_RR a_AT1 response_NN1 to_II financial_JJ incentives_NN2 ._. 
But_CCB while_CS sabbaticals_NN2 at_II the_AT Hoover_NN1 Institution_NN1 and_CC job_NN1 opportunities_NN2 on_II Wall_NP1 Street_NNL1 are_VBR nothing_PN1 to_TO sneeze_VVI at_II ,_, the_AT central_JJ cause_NN1 of_IO the_AT profession_NN1 's_GE failure_NN1 was_VBDZ the_AT desire_NN1 for_IF an_AT1 all-encompassing_NN1 ,_, intellectually_RR elegant_JJ approach_NN1 that_CST also_RR gave_VVD economists_NN2 a_AT1 chance_NN1 to_TO show_VVI off_RP their_APPGE mathematical_JJ prowess_NN1 ._. 
Unfortunately_RR ,_, this_DD1 romanticized_VVD and_CC sanitized_JJ vision_NN1 of_IO the_AT economy_NN1 led_VVD most_DAT economists_NN2 to_TO ignore_VVI all_DB the_AT things_NN2 that_CST can_VM go_VVI wrong_RR ._. 
They_PPHS2 turned_VVD a_AT1 blind_JJ eye_NN1 to_II the_AT limitations_NN2 of_IO human_JJ rationality_NN1 that_CST often_RR lead_VV0 to_II bubbles_NN2 and_CC busts_NN2 ;_; to_II the_AT problems_NN2 of_IO institutions_NN2 that_CST run_VV0 amok_RR ;_; to_II the_AT imperfections_NN2 of_IO markets_NN2 --_NN1 especially_RR financial_JJ markets_NN2 --_NN1 that_CST can_VM cause_VVI the_AT economy_NN1 's_GE operating_NN1 system_NN1 to_TO undergo_VVI sudden_JJ ,_, unpredictable_JJ crashes_NN2 ;_; and_CC to_II the_AT dangers_NN2 created_VVN when_CS regulators_NN2 do_VD0 n't_XX believe_VVI in_II regulation_NN1 ._. 
It_PPH1 's_VBZ much_RR harder_JJR to_TO say_VVI where_RRQ the_AT economics_NN1 profession_NN1 goes_VVZ from_II here_RL ._. 
But_CCB what_DDQ 's_VBZ almost_RR certain_JJ is_VBZ that_CST economists_NN2 will_VM have_VHI to_TO learn_VVI to_TO live_VVI with_IW messiness_NN1 ._. 
That_REX21 is_REX22 ,_, they_PPHS2 will_VM have_VHI to_TO acknowledge_VVI the_AT importance_NN1 of_IO irrational_JJ and_CC often_RR unpredictable_JJ behavior_NN1 ,_, face_VV0 up_II21 to_II22 the_AT often_RR idiosyncratic_JJ imperfections_NN2 of_IO markets_NN2 and_CC accept_VV0 that_CST an_AT1 elegant_JJ economic_JJ "_" theory_NN1 of_IO everything_PN1 "_" is_VBZ a_AT1 long_JJ way_NN1 off_RP ._. 
In_II practical_JJ terms_NN2 ,_, this_DD1 will_VM translate_VVI into_II more_RGR cautious_JJ policy_NN1 advice_NN1 --_NN1 and_CC a_AT1 reduced_JJ willingness_NN1 to_TO dismantle_VVI economic_JJ safeguards_NN2 in_II the_AT faith_NN1 that_CST markets_NN2 will_VM solve_VVI all_DB problems_NN2 ._. 
The_AT birth_NN1 of_IO economics_NN1 as_II a_AT1 discipline_NN1 is_VBZ usually_RR credited_VVN to_II Adam_NP1 Smith_NP1 ,_, who_PNQS published_VVD "_" The_AT Wealth_NN1 of_IO Nations_NN2 "_" in_II 1776_MC ._. 
Over_II the_AT next_MD 160_MC years_NNT2 an_AT1 extensive_JJ body_NN1 of_IO economic_JJ theory_NN1 was_VBDZ developed_VVN ,_, whose_DDQGE central_JJ message_NN1 was_VBDZ :_: Trust_VV0 the_AT market_NN1 ._. 
Yes_UH ,_, economists_NN2 admitted_VVD that_CST there_EX were_VBDR cases_NN2 in_II which_DDQ markets_NN2 might_VM fail_VVI ,_, of_IO which_DDQ the_AT most_RGT important_JJ was_VBDZ the_AT case_NN1 of_IO "_" externalities_NN2 "_" --_NN1 costs_VVZ that_CST people_NN impose_VV0 on_II others_NN2 without_IW paying_VVG the_AT price_NN1 ,_, like_II traffic_NN1 congestion_NN1 or_CC pollution_NN1 ._. 
But_CCB the_AT basic_JJ presumption_NN1 of_IO "_" neoclassical_JJ "_" economics_NN1 (_( named_VVN after_II the_AT late-19th-century_JJ theorists_NN2 who_PNQS elaborated_VVD on_II the_AT concepts_NN2 of_IO their_APPGE "_" classical_JJ "_" predecessors_NN2 )_) was_VBDZ that_CST we_PPIS2 should_VM have_VHI faith_NN1 in_II the_AT market_NN1 system_NN1 ._. 
This_DD1 faith_NN1 was_VBDZ ,_, however_RR ,_, shattered_VVN by_II the_AT Great_JJ Depression_NN1 ._. 
Actually_RR ,_, even_RR in_II the_AT face_NN1 of_IO total_JJ collapse_NN1 some_DD economists_NN2 insisted_VVD that_CST whatever_DDQV happens_VVZ in_II a_AT1 market_NN1 economy_NN1 must_VM be_VBI right_JJ :_: "_" Depressions_NN2 are_VBR not_XX simply_RR evils_NN2 ,_, "_" declared_VVD Joseph_NP1 Schumpeter_NP1 in_II 1934_MC --_JJ 1934_MC !_! 
They_PPHS2 are_VBR ,_, he_PPHS1 added_VVD ,_, "_" forms_NN2 of_IO something_PN1 which_DDQ has_VHZ to_TO be_VBI done_VDN ._. "_" 
But_CCB many_DA2 ,_, and_CC eventually_RR most_DAT ,_, economists_NN2 turned_VVN to_II the_AT insights_NN2 of_IO John_NP1 Maynard_NP1 Keynes_NP1 for_IF both_RR an_AT1 explanation_NN1 of_IO what_DDQ had_VHD happened_VVN and_CC a_AT1 solution_NN1 to_II future_JJ depressions_NN2 ._. 
Keynes_NP1 did_VDD not_XX ,_, despite_II what_DDQ you_PPY may_VM have_VHI heard_VVN ,_, want_VV0 the_AT government_NN1 to_TO run_VVI the_AT economy_NN1 ._. 
He_PPHS1 described_VVD his_APPGE analysis_NN1 in_II his_APPGE 1936_MC masterwork_NN1 ,_, "_" The_AT General_JJ Theory_NN1 of_IO Employment_NN1 ,_, Interest_NN1 and_CC Money_NN1 ,_, "_" as_CSA "_" moderately_RR conservative_JJ in_II its_APPGE implications_NN2 ._. "_" 
He_PPHS1 wanted_VVD to_TO fix_VVI capitalism_NN1 ,_, not_XX replace_VV0 it_PPH1 ._. 
But_CCB he_PPHS1 did_VDD challenge_VVI the_AT notion_NN1 that_CST free-market_NN1 economies_NN2 can_VM function_VVI without_IW a_AT1 minder_NN1 ,_, expressing_VVG particular_JJ contempt_NN1 for_IF financial_JJ markets_NN2 ,_, which_DDQ he_PPHS1 viewed_VVD as_CSA being_VBG dominated_VVN by_II short-term_JJ speculation_NN1 with_IW little_DA1 regard_NN1 for_IF fundamentals_NN2 ._. 
And_CC he_PPHS1 called_VVD for_IF active_JJ government_NN1 intervention_NN1 --_NN1 printing_VVG more_DAR money_NN1 and_CC ,_, if_CS necessary_JJ ,_, spending_VVG heavily_RR on_II public_JJ works_NN --_JJ to_TO fight_VVI unemployment_NN1 during_II slumps_NN2 ._. 
It_PPH1 's_VBZ important_JJ to_TO understand_VVI that_CST Keynes_NP1 did_VDD much_DA1 more_DAR than_CSN make_VV0 bold_JJ assertions_NN2 ._. 
"_" The_AT General_JJ Theory_NN1 "_" is_VBZ a_AT1 work_NN1 of_IO profound_JJ ,_, deep_JJ analysis_NN1 --_NN1 analysis_NN1 that_CST persuaded_VVD the_AT best_JJT young_JJ economists_NN2 of_IO the_AT day_NNT1 ._. 
Yet_RR the_AT story_NN1 of_IO economics_NN1 over_II the_AT past_NN1 half_DB century_NNT1 is_VBZ ,_, to_II a_AT1 large_JJ degree_NN1 ,_, the_AT story_NN1 of_IO a_AT1 retreat_NN1 from_II Keynesianism_NN1 and_CC a_AT1 return_NN1 to_II neoclassicism_NN1 ._. 
The_AT neoclassical_JJ revival_NN1 was_VBDZ initially_RR led_VVN by_II Milton_NP1 Friedman_NN1 of_IO the_AT University_NN1 of_IO Chicago_NP1 ,_, who_PNQS asserted_VVD as_RG early_RR as_CSA 1953_MC that_DD1 neoclassical_JJ economics_NN1 works_VVZ well_RR enough_RR as_II a_AT1 description_NN1 of_IO the_AT way_NN1 the_AT economy_NN1 actually_RR functions_VVZ to_TO be_VBI "_" both_RR extremely_RR fruitful_JJ and_CC deserving_JJ of_IO much_DA1 confidence_NN1 ._. "_" 
But_CCB what_DDQ about_II depressions_NN2 ?_? 
Friedman_NP1 's_GE counterattack_NN1 against_II Keynes_NP1 began_VVD with_IW the_AT doctrine_NN1 known_VVN as_II monetarism_NN1 ._. 
Monetarists_NN2 did_VDD n't_XX disagree_VVI in_II principle_NN1 with_IW the_AT idea_NN1 that_CST a_AT1 market_NN1 economy_NN1 needs_VVZ deliberate_JJ stabilization_NN1 ._. 
"_" We_PPIS2 are_VBR all_DB Keynesians_NN2 now_RT ,_, "_" Friedman_NP1 once_RR said_VVD ,_, although_CS he_PPHS1 later_RRR claimed_VVD he_PPHS1 was_VBDZ quoted_VVN out_II21 of_II22 context_NN1 ._. 
Monetarists_NN2 asserted_VVD ,_, however_RR ,_, that_CST a_AT1 very_RG limited_JJ ,_, circumscribed_VVD form_NN1 of_IO government_NN1 intervention_NN1 --_NN1 namely_REX ,_, instructing_VVG central_JJ banks_NN2 to_TO keep_VVI the_AT nation_NN1 's_GE money_NN1 supply_NN1 ,_, the_AT sum_NN1 of_IO cash_NN1 in_II circulation_NN1 and_CC bank_NN1 deposits_NN2 ,_, growing_VVG on_II a_AT1 steady_JJ path_NN1 --_NN1 is_VBZ all_DB that_DD1 's_VBZ required_VVN to_TO prevent_VVI depressions_NN2 ._. 
Famously_RR ,_, Friedman_NP1 and_CC his_APPGE collaborator_NN1 ,_, Anna_NP1 Schwartz_NP1 ,_, argued_VVD that_CST if_CS the_AT Federal_JJ Reserve_NN1 had_VHD done_VDN its_APPGE job_NN1 properly_RR ,_, the_AT Great_JJ Depression_NN1 would_VM not_XX have_VHI happened_VVN ._. 
Later_RRR ,_, Friedman_NP1 made_VVD a_AT1 compelling_JJ case_NN1 against_II any_DD deliberate_JJ effort_NN1 by_II government_NN1 to_TO push_VVI unemployment_NN1 below_II its_APPGE "_" natural_JJ "_" level_NN1 (_( currently_RR thought_VVN to_TO be_VBI about_RG 4.8_MC percent_NNU in_II the_AT United_NP1 States_NP1 )_) :_: excessively_RR expansionary_JJ policies_NN2 ,_, he_PPHS1 predicted_VVD ,_, would_VM lead_VVI to_II a_AT1 combination_NN1 of_IO inflation_NN1 and_CC high_JJ unemployment_NN1 --_NN1 a_AT1 prediction_NN1 that_CST was_VBDZ borne_VVN out_RP by_II the_AT stagflation_NN1 of_IO the_AT 1970s_MC2 ,_, which_DDQ greatly_RR advanced_VVD the_AT credibility_NN1 of_IO the_AT anti-Keynesian_JJ movement_NN1 ._. 
Eventually_RR ,_, however_RR ,_, the_AT anti-Keynesian_JJ counterrevolution_NN1 went_VVD far_RR beyond_II Friedman_NP1 's_GE position_NN1 ,_, which_DDQ came_VVD to_TO seem_VVI relatively_RR moderate_JJ compared_VVN with_IW what_DDQ his_APPGE successors_NN2 were_VBDR saying_VVG ._. 
Among_II financial_JJ economists_NN2 ,_, Keynes_NP1 's_GE disparaging_JJ vision_NN1 of_IO financial_JJ markets_NN2 as_II a_AT1 "_" casino_NN1 "_" was_VBDZ replaced_VVN by_II "_" efficient_JJ market_NN1 "_" theory_NN1 ,_, which_DDQ asserted_VVD that_CST financial_JJ markets_NN2 always_RR get_VV0 asset_NN1 prices_NN2 right_RR given_VVN the_AT available_JJ information_NN1 ._. 
Meanwhile_RR ,_, many_DA2 macroeconomists_NN2 completely_RR rejected_VVD Keynes_NP1 's_GE framework_NN1 for_IF understanding_VVG economic_JJ slumps_NN2 ._. 
Some_DD returned_VVD to_II the_AT view_NN1 of_IO Schumpeter_NP1 and_CC other_JJ apologists_NN2 for_IF the_AT Great_JJ Depression_NN1 ,_, viewing_VVG recessions_NN2 as_II a_AT1 good_JJ thing_NN1 ,_, part_NN1 of_IO the_AT economy_NN1 's_GE adjustment_NN1 to_TO change_VVI ._. 
And_CC even_RR those_DD2 not_XX willing_JJ to_TO go_VVI that_RG far_RR argued_VVN that_CST any_DD attempt_NN1 to_TO fight_VVI an_AT1 economic_JJ slump_NN1 would_VM do_VDI more_DAR harm_NN1 than_CSN good_JJ ._. 
Not_XX all_DB macroeconomists_NN2 were_VBDR willing_JJ to_TO go_VVI down_II this_DD1 road_NN1 :_: many_DA2 became_VVD self-described_JJ New_JJ Keynesians_NN2 ,_, who_PNQS continued_VVD to_TO believe_VVI in_II an_AT1 active_JJ role_NN1 for_IF the_AT government_NN1 ._. 
Yet_RR even_RR they_PPHS2 mostly_RR accepted_VVD the_AT notion_NN1 that_CST investors_NN2 and_CC consumers_NN2 are_VBR rational_JJ and_CC that_CST markets_NN2 generally_RR get_VV0 it_PPH1 right_JJ ._. 
And_CC Keynes_NP1 considered_VVD it_PPH1 a_AT1 very_RG bad_JJ idea_NN1 to_TO let_VVI such_DA markets_NN2 ,_, in_II which_DDQ speculators_NN2 spent_VVD their_APPGE time_NNT1 chasing_VVG one_PPX121 another_PPX122 's_GE tails_NN2 ,_, dictate_VV0 important_JJ business_NN1 decisions_NN2 :_: "_" When_RRQ the_AT capital_NN1 development_NN1 of_IO a_AT1 country_NN1 becomes_VVZ a_AT1 by-product_NN1 of_IO the_AT activities_NN2 of_IO a_AT1 casino_NN1 ,_, the_AT job_NN1 is_VBZ likely_JJ to_TO be_VBI ill-done_VDN ._. "_" 
By_II 1970_MC or_CC so_RR ,_, however_RR ,_, the_AT study_NN1 of_IO financial_JJ markets_NN2 seemed_VVD to_TO have_VHI been_VBN taken_VVN over_RP by_II Voltaire_NP1 's_GE Dr._NNB Pangloss_NP1 ,_, who_PNQS insisted_VVD that_CST we_PPIS2 live_VV0 in_II the_AT best_JJT of_IO all_DB possible_JJ worlds_NN2 ._. 
Discussion_NN1 of_IO investor_NN1 irrationality_NN1 ,_, of_IO bubbles_NN2 ,_, of_IO destructive_JJ speculation_NN1 had_VHD virtually_RR disappeared_VVN from_II academic_JJ discourse_NN1 ._. 
The_AT field_NN1 was_VBDZ dominated_VVN by_II the_AT "_" efficient-market_JJ hypothesis_NN1 ,_, "_" promulgated_VVN by_II Eugene_NP1 Fama_NP1 of_IO the_AT University_NN1 of_IO Chicago_NP1 ,_, which_DDQ claims_VVZ that_CST financial_JJ markets_NN2 price_NN1 assets_NN2 precisely_RR at_II their_APPGE intrinsic_JJ worth_NN1 given_VVN all_DB publicly_RR available_JJ information_NN1 ._. 
(_( The_AT price_NN1 of_IO a_AT1 company_NN1 's_GE stock_NN1 ,_, for_REX21 example_REX22 ,_, always_RR accurately_RR reflects_VVZ the_AT company_NN1 's_GE value_NN1 given_VVN the_AT information_NN1 available_JJ on_II the_AT company_NN1 's_GE earnings_NN2 ,_, its_APPGE business_NN1 prospects_NN2 and_RR31 so_RR32 on_RR33 ._. )_) 
And_CC by_II the_AT 1980s_MC2 ,_, finance_VV0 economists_NN2 ,_, notably_RR Michael_NP1 Jensen_NP1 of_IO the_AT Harvard_NP1 Business_NN1 School_NN1 ,_, were_VBDR arguing_VVG that_CST because_CS financial_JJ markets_NN2 always_RR get_VV0 prices_NN2 right_RR ,_, the_AT best_JJT thing_NN1 corporate_JJ chieftains_NN2 can_VM do_VDI ,_, not_XX just_RR for_IF themselves_PPX2 but_CCB for_IF the_AT sake_NN1 of_IO the_AT economy_NN1 ,_, is_VBZ to_TO maximize_VVI their_APPGE stock_NN1 prices_NN2 ._. 
In_II other_JJ words_NN2 ,_, finance_VV0 economists_NN2 believed_VVD that_CST we_PPIS2 should_VM put_VVI the_AT capital_NN1 development_NN1 of_IO the_AT nation_NN1 in_II the_AT hands_NN2 of_IO what_DDQ Keynes_NP1 had_VHD called_VVN a_AT1 "_" casino_NN1 ._. "_" 
It_PPH1 's_VBZ hard_JJ to_TO argue_VVI that_CST this_DD1 transformation_NN1 in_II the_AT profession_NN1 was_VBDZ driven_VVN by_II events_NN2 ._. 
True_JJ ,_, the_AT memory_NN1 of_IO 1929_MC was_VBDZ gradually_RR receding_VVG ,_, but_CCB there_EX continued_VVD to_TO be_VBI bull_NN1 markets_NN2 ,_, with_IW widespread_JJ tales_NN2 of_IO speculative_JJ excess_NN1 ,_, followed_VVN by_II bear_NN1 markets_NN2 ._. 
In_II 1973-4_MCMC ,_, for_REX21 example_REX22 ,_, stocks_NN2 lost_VVD 48_MC percent_NNU of_IO their_APPGE value_NN1 ._. 
And_CC the_AT 1987_MC stock_NN1 crash_NN1 ,_, in_II which_DDQ the_AT Dow_NP1 plunged_VVD nearly_RR 23_MC percent_NNU in_II a_AT1 day_NNT1 for_IF no_AT clear_JJ reason_NN1 ,_, should_VM have_VHI raised_VVN at_RR21 least_RR22 a_AT1 few_DA2 doubts_NN2 about_II market_NN1 rationality_NN1 ._. 
These_DD2 events_NN2 ,_, however_RR ,_, which_DDQ Keynes_NP1 would_VM have_VHI considered_VVN evidence_NN1 of_IO the_AT unreliability_NN1 of_IO markets_NN2 ,_, did_VDD little_DA1 to_II blunt_JJ the_AT force_NN1 of_IO a_AT1 beautiful_JJ idea_NN1 ._. 
The_AT theoretical_JJ model_NN1 that_CST finance_VV0 economists_NN2 developed_VVN by_II assuming_VVG that_CST every_AT1 investor_NN1 rationally_RR balances_VVZ risk_NN1 against_II reward_NN1 --_NN1 the_AT so-called_JJ Capital_NN1 Asset_NN1 Pricing_VVG Model_NN1 ,_, or_CC CAPM_NP1 (_( pronounced_JJ cap-em_FU )_) --_NN1 is_VBZ wonderfully_RR elegant_JJ ._. 
And_CC if_CS you_PPY accept_VV0 its_APPGE premises_NN2 it_PPH1 's_VBZ also_RR extremely_RR useful_JJ ._. 
CAPM_NP1 not_XX only_RR tells_VVZ you_PPY how_RRQ to_TO choose_VVI your_APPGE portfolio_NN1 --_NN1 even_RR more_RGR important_JJ from_II the_AT financial_JJ industry_NN1 's_GE point_NN1 of_IO view_NN1 ,_, it_PPH1 tells_VVZ you_PPY how_RRQ to_TO put_VVI a_AT1 price_NN1 on_II financial_JJ derivatives_NN2 ,_, claims_VVZ on_II claims_NN2 ._. 
The_AT elegance_NN1 and_CC apparent_JJ usefulness_NN1 of_IO the_AT new_JJ theory_NN1 led_VVN to_II a_AT1 string_NN1 of_IO Nobel_NP1 prizes_NN2 for_IF its_APPGE creators_NN2 ,_, and_CC many_DA2 of_IO the_AT theory_NN1 's_GE adepts_NN2 also_RR received_VVN more_RGR mundane_JJ rewards_NN2 :_: Armed_VVN with_IW their_APPGE new_JJ models_NN2 and_CC formidable_JJ math_NN1 skills_NN2 --_NN1 the_AT more_RGR arcane_JJ uses_NN2 of_IO CAPM_NP1 require_VV0 physicist-level_JJ computations_NN2 --_JJ mild-mannered_JJ business-school_JJ professors_NN2 could_VM and_CC did_VDD become_VVI Wall_NP1 Street_NNL1 rocket_NN1 scientists_NN2 ,_, earning_VVG Wall_NP1 Street_NNL1 paychecks_NN2 ._. 
