The most interesting moment at a recent conference held in Bretton Woods, New Hampshire - site of the 1945 conference that created today's global economic architecture - came when Financial Times columnist Martin Wolf quizzed former United States Treasury Secretary Larry Summers, President Barack Obama's ex-assistant for economic policy. "[Doesn't] what has happened in the past few years," Wolf asked, "simply suggest that [academic] economists did not understand what was going on?"

Here is the most interesting part of Summers' long answer: "There is a lot in [Walter] Bagehot that is about the crisis we just went through. There is more in [Hyman] Minsky, and perhaps more still in [Charles] Kindleberger." That may sound obscure to a non-economist, but it was a devastating indictment.

...

For Summers, the problem is that there is so much that is "distracting, confusing, and problem-denying in...the first year course in most PhD programs." As a result, even though "economics knows a fair amount," it "has forgotten a fair amount that is relevant, and it has been distracted by an enormous amount."