I am keenly aware that since, say, 1997 one disagrees with Paul Krugman at one's grave intellectual peril...
I am not as confident as Paul Krugman is that "the past decade has been a huge validation for textbook macroeconomics", and am somewhat puzzled at his insistence that it has been. After all, a large component of what Krugman calls "good old-fashioned macro" was that expectations were, if not rational, adaptive.Thus John Maynard Keynes's <https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch12.htm>
"speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done..." had no place in "old-fashioned macro". And it is not as though this was a flaw and could be quickly, coherently, and satisfactorily patched.
The integration of behavioral finance and macro is still not done—which is why I am such a booster <https://www.project-syndicate.org/commentary/crisis-of-beliefs-and-the-2008-crash-by-j--bradford-delong-2018-10>
of **Nicola Gennaioli and Andrei Shleifer** (2018): _A Crisis of Beliefs: Investor Psychology and Financial Fragility_ <https://books.google.com/books?isbn=0691184925>
. (That, and Andrei is my friend.) They are at least looking in the right direction.
Cf.: **Paul Krugman**: _What Do We Actually Know About the Economy?_ <https://www.nytimes.com/2018/09/16/opinion/what-do-we-actually-know-about-the-economy-wonkish.html>:
"n an important sense the past decade has been a huge validation for textbook macroeconomics.... IS-LM... is the simplest model you can write down of how interest rates and output are jointly determined, and is how most practicing macroeconomists actually think about short-run economic fluctuations.... The overall story... is one of overwhelming predictive success. Basic, old-fashioned macroeconomics didn’t fail in the crisis–it worked extremely well.... But, you say, we didn’t see the Great Recession coming.... That’s... a problem with financial economics.... Where are the examples of microeconomic theory providing strong, counterintuitive, successful predictions on the same order as the success of IS-LM macroeconomics after 2008?..."