Home -> Law Blog Directory -> International Law Blogs -> jurabilis - German bLAWg from Berlin.

International Law

: jurabilis - German bLAWg from Berlin.

Wirtschaftswissenschaften am Scheideweg?

Few economists saw our current crisis coming, but this predictive failure was the least of the field's problems. More important was the profession's blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable - indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed's best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration's stimulus plans are "schlock economics," and his Chicago colleague John Cochrane says they're based on discredited "fairy tales." In response, Brad DeLong of the University of California, Berkeley, writes of the "intellectual collapse" of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go from here?

Ein überaus lesenswerter Beitrag von Paul Krugman ("The Return of Depression Economics and the Crisis of 2008") in der New York Times trägt den Titel "How Did Economists Get It So Wrong?" und geht dem Trauma auf den Grund, das die Finanzkrise den Makroökonomen allerorten zugefügt hat.

Full post as published by jurabilis - German bLAWg from Berlin. on January 09, 2010 (boomark / email).