Modern macroeconomic models have been widely criticised as relying too much on rationality and market efficiency. However, basically their predictions about this crisis are being borne out by events. "Crashes" are an integral part of an "efficient market" capitalism and are brought on by swings...

Crises are triggered by the inherent uncertainty of the capitalist system. We represent this uncertainty in an open economy real business cycle model of the UK by including non-stationary productivity shocks. A random sequence of good or bad shocks will accumulate, producing euphorias and...