Richard Posner, leader of the Chicago School of Economics and Fourth Circuit Court of Appeals judge, uses his new book, “A Failure of Capitalism,” to try to rescue the Chicago School’s foundational assumption that the economy behaves as if all economic agents and actors are rational, far-sighted calculators. In some sense, Posner must try. For without this underlying assumption, the clock strikes midnight, the stately brougham of Chicago economic theory turns into a pumpkin, and the analytical horses that have pulled it so far over the past half- century turn back into little white mice.

Thus he writes: "At no stage need irrationality" on the part of markets or their participants "be posited to explain” the collapse of financial markets last year and the current deep recession.

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Brad DeLong is a professor in the Department of Economics at U.C. Berkeley; chair of its Political Economy major; a research associate at the National Bureau of Economic Research; and from 1993 to 1995 he worked for the U.S. Treasury as a deputy assistant secretary for economic policy. He has written on, among other topics, the evolution and functioning of the U.S. and other nations' stock markets, the course and determinants of long-run economic growth, the making of economic policy, the changing nature of the American business cycle, and the history of economic thought.