
Economists missed the brewing crisis. Now many are asking: How can we do better? - robg
http://www.boston.com/bostonglobe/ideas/articles/2008/12/21/paradigm_lost/?page=full
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mistermann
Reading articles like this is so infuriating...MANY economists (and non-
economist bloggers) have been predicting this scenario for years. Saying "Ya,
but they didn't tell us _when_ it would happen, so they are no better than the
others" is a total cop out. You would think that in a field that is largely
(although not totally) scientific, when leading figures are shown to be so
spectacularly wrong, that they might become at least slightly curious of the
theories of people in other camps that predicted it. But instead, they
essentially say no one could have predicted this. Bollocks. Lots of people
predicted this. I daresay only a university educated economist could not see
this coming. Any number of very simple mental experiments involving simple
multiplication showed that what we've been experiencing was _at least_
unsustainable, but they never even admitted to that.

"Already, the crisis is reshaping long-running debates. It has chastened
believers in the self-correcting abilities of the free market - Alan Greenspan
said as much before Congress in October - and emboldened those who see the
need for more active government intervention." > Well, it's not causing the
proper debates, for example, which camp has the most correct theory? The
Austrians _told_ you this was coming, yet you still act like they don't exist,
why is that? And as for the self-correcting abilities of the market, that's
exactly what is happening now, and the reason it is so painful and shocking is
because the natural correction was circumvented several times in the past.

"Today's crisis has brought Keynes back to the center of the discussion, but
some economists also see it driving the field into new territory. Up until
very recently, the study of market bubbles was marginalized - there was no
widely accepted definition of what a bubble was, and some economists,
believers in the complete rationality of markets, argued that bubbles didn't
even exist." > Well, can we finally agree that bubbles are possible and did
exist? There certainly wasn't a "widely accepted" definition of a bubble, but
there were many who defined one, and said we were in one. Should perhaps the
people that couldn't decide before sit down and listen to the people that said
we were in one so they can learn something for a change?

"Robert Lucas, an economist and Nobel laureate at the University of Chicago
and a champion of the rationality of markets, doesn't see much fundamental
change coming out of the crisis, either. What it has reminded us of, he
argues, is simply the impossibility of seeing these events in advance. I don't
know anybody involved who thought he could predict these turning points. Do
macroeconomists know as much as we thought we did?" he asks. "Of course not."
> What a disgraceful display of intellectual dishonesty, or else outright
ignorance, which would be even worse.

All of these children should be sent to their room and forced to read Murray
Rothbard, Mish, Peter Schiff, etc and not come out until they can finally
write a convincing essay on why we were obviously in a bubble.

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axiom
Quite a few did not miss the crisis. Peter Schiff comes to mind.

<http://www.youtube.com/watch?v=2I0QN-FYkpw>

This isn't a question of economists focusing on things that were too abstract
or that somehow these crises are just inherently unpredictable. This was
caused by the widespread idea that you can legislate away economic problems
e.g. 1% interest rates following the tech bubble. You can't subvert reality
with clever accounting tricks. Eventually the chickens come home to roost.

~~~
puzzle-out
Your right - there were a number of people predicting this, but when you had
year on year growth, their voices seemed less relevant. I was guilty of this -
I went to an Entrepreneurs dinner two years back where Jim Mellon, the guest
speaker, basically told us that the economy was in for a huge downturn. But
oddly enough, he was delivering his message in the wrong environment - all
paid for dinner, swish restaurant, lots of nice wine - so I don't think we
really registered what he was saying. He gave away free copies of his book,
"Wake Up", and it now makes fairly prophetic reading.

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jwesley
Stop respecting the predictions of economists. It is a social science that
pretends to be a hard science, with disastrous results. Can anyone justify the
efficient market hypothesis after the current crisis? This is all explained
very well in The Black Swan.

~~~
axiom
A crucial point in The Black Swam is that randomness is relative. Something
that's random to you is not necessarily random to someone else (i.e. the dots
in the sky were randomly distributed and unpredictable to many people a few
thousand years ago.) It's all about how much knowledge you have about the
system.

So don't listen to SOME economists, and keep in mind their track record of
predictions. Not all economists are equally bad.

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mechanical_fish
Did anybody else read the headline and think "OMG, brewing is in crisis, too!
Without my beer I'll never survive the downturn!"

~~~
janm
Yes. Just back from holidays and a problem with beer was concerning. Very
relieved that it's just the economy.

