Friedman, Benjamin2011-10-182011Friedman, Benjamin M. 2011. Reconstructing Economics in Light of the 2007-? Financial Crisis. Journal of Economic Education 41(4): 391-397.2152-40680022-0485http://nrs.harvard.edu/urn-3:HUL.InstRepos:5241348The lessons learned from the recent financial crisis should significantly reshape the economics profession's thinking, including, importantly, what we teach our students. Five such lessons are that we live in a monetary economy and therefore aggregate demand and policies that affect aggregate demand are determinants of real economic outcomes; that what actually matters for this purpose is not money but the volume, availability, and price of credit; that the fact that most lending is done by financial institutions matters as well; that the prices set in our financial markets do not always exhibit the “rationality” economists normally claim for them; and that both frictions and the uneven impact of economic events prevent us from adapting to disturbances in the way textbook economics suggests.en-USfinancial crisisteaching macroeconomicsJournal Article2011-10-1810.1080/00220485.2010.510397