In the theory wars, which are as much wars over policy choices, two very bad kinds of theories are driving out good theories.

Keynesian economics, which had been nearly forgotten inside the macro field, has found new voices from outside. They take the position that fiscal “stimulus” of all kinds is effective against slumps of all causes. Their strategy is to defeat their only popular rivals, the neoclassicals, by deriding their view that the employment downturn involves a contraction of the labour supply.

Neoclassical equilibrium theory, which some macroeconomists had grown sceptical of, has also found new practitioners. They take the position that, aside from bad policy moves, recessions, even “great” ones, are caused by random market events and corrected by market adjustments. Demand stimulus is of no use, since there is no systematic shortage of demand.