Question

What did Michael Jensen say? What would Keynes think of his ideas?

Explain what Larry Summers said about ketchup? How was this critical of efficient markets

Answer 1

In 1978, Michael Jensen declared that there is no other proposition in economics which has more solid empirical evidence supporting it than the efficient-markets hypothesis.

Keynes would certainly agree that current unemployment rates reflect a recession-induced shortfall in the demand for labour. The evidence for this claim has been deftly summarized by Paul Krugman, citing studies by the Economic Policy Institute and the Roosevelt Institute. The competing argument that we are simply experiencing a mismatch between employer needs and labour force skills lacks credibility.

Larry Summers employed the metaphor of “ketchup economics” to illustrate the relationship and differences between economics and finance. He distinguished two groups of researchers: general economists who study the ketchup market as part of the broader economic system and so-called ”ketchup economists”, located in the Department of Ketchup where they receive much higher salaries than do general economists .