A philosopher of science critiques the Chicago School and sides with Krugman.

Why Greg Ip is a good economics journalist.

NY Mag profiles the founder of conspiracy-theory mongering blog Zero Hedge.

On the search for fraudulent pollsters.

From a new NBER paper by Annamaria Lusardi, Olivia Mitchell, and Vilsa Curto (free version):

So I think I agree with pretty much every point Paul Krugman makes in yesterdays' Times magazine about where economics went off the rails. Including his big prescriptive point:

Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with flaws and frictions. The good news is that we don’t have to start from scratch. Even during the heyday of perfect-market economics, there was a lot of work done on the ways in which the real economy deviated from the theoretical ideal. What’s probably going to happen now — in fact, it’s already happening — is that flaws-and-frictions economics will move from the periphery of economic analysis to its center.

There’s already a fairly well developed example of the kind of economics I have in mind: the school of thought known as behavioral finance. Practitioners of this approach emphasize two things. First, many real-world investors bear little resemblance to the cool calculators of efficient-market theory: they’re all too subject to herd behavior, to bouts of irrational exuberance and unwarranted panic. Second, even those who try to base their decisions on cool calculation often find that they can’t, that problems of trust, credibility and limited collateral force them to run with the herd.

On the first point: even during the heyday of the efficient-market hypothesis, it seemed obvious that many real-world investors aren’t as rational as the prevailing models assumed. ... Behavioral finance, drawing on the broader movement known as behavioral economics, tries to answer that question by relating the apparent irrationality of investors to known biases in human cognition, like the tendency to care more about small losses than small gains or the tendency to extrapolate too readily from small samples (e.g., assuming that because home prices rose in the past few years, they’ll keep on rising).

I'd just add one word of caution: 

The combined size of the U.S. stock, bond, and derivatives markets may run into the trillions of dollars, but the underlying money flows on which these bets are based only represent 20-30% of our GDP. The other 70% -- representing mostly salaries and other income flows -- can't be traded against for the most part. And given how badly financial instruments performed in 2008, that may seem like a godsend.

Barack Obama has the type of mind--orderly, analytical, well-read--that takes naturally to the study of ideas. But he's always been uncomfortable describing himself in ideological terms. Is he a liberal? During the campaign, Obama would mock those who applied the label to him: "There's nothing liberal about wanting to reduce money in politics," he'd say. "There's nothing liberal about wanting to make sure [our soldiers] are treated properly when they come home." Is he a moderate?