How we got to where we are

If Hari Seldon, the fictional social scientist who can predict the future course of history with uncanny accuracy, has a real-world analog, it would have to be Paul Samuelson. This man essentially invented modern economics - macro and micro - back in the 50s and 60s. At age 94, he's still smarter than you or I. So it's gratifying that he essentially sees macroeconomics going off the rails at about the same time, in the same way, as I've always believed:

But anyway. The craze that really succeeded the Keynesian policy craze was not the monetarist, Friedman view, but the [Robert] Lucas and [Thomas] Sargent new-classical view. And this particular group just said, in effect, that the system will self regulate because the market is all a big rational system.

Those guys were useless at Federal Reserve meetings. Each time stuff broke out, I would take an informal poll of them. If they had wisdom, they were silent. My profession was not well prepared to act.

Yup. Lucas, Sargent, and Ed Prescott came up with the brilliant idea that the macroeconomy was perfectly efficient; they "proved" this by A) assuming it was true in all their models, and then B) relying on the crappiness of macro data to fail to definitively prove them wrong until well after they had won their Nobels. "The government can't possibly do anything to help the economy," the neo-classical macro priests researchers said, and since really big macro messes come only once every few decades, no one felt really urgent about proving them wrong. Conservatives lapped it up.