In this paper, we seek to understand why, despite the economic dislocations of the last four years, there has been no revolution in economic thinking, and to ask whether change could still occur in the next few years.

On 15 September 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection. This was a watershed moment in the 2008/09 financial collapse. Before Lehman's went under, financial markets were in turmoil and a number of advanced economies were already in recession but it was possible to imagine that policymakers might find a way to avoid a substantial downturn. After the bankruptcy, a severe recession became inevitable.

A year later, despite the efforts of the G20 to coordinate a policy response to the worsening crisis, the world economy was in the depths of its worst recession since the 1930s. This prompted many economic commentators to suggest that a major upheaval in economic thinking was imminent.

And yet, three years after Lehman's bankruptcy, there is little evidence the economic paradigm has shifted. After flirting with Keynesian-style fiscal reflation during the recession, governments in advanced economies are now cutting spending and increasing taxes in order to reduce their budget deficits. Apart from a limited tightening of the regulations under which banks operate, nothing much has changed.