All Change: Will there be a revolution in economic thinking 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.