Posted on 09/03/2009 3:42:12 PM PDT by Lorianne
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.
(Excerpt) Read more at nytimes.com ...
Keynes.
Look in the mirror and you’ll have your answer.
Factor in corruption and excessive greed and maybe they would have gotten it right.
Only the brain-dead Keynsian lemmings didn't see this train wreck coming.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig Von Mises
“Several brokerage houses tumbled; blue-sky investment companies formed during the happy bull market days went to smash, disclosing miserable tales of rascality; over a thousand banks caved in during 1930, as a result of marking down both of real estate and of securities; and in December occurred the largest bank failure in American financial history, the fall of the ill-named Bank of the United States in New York.”
~~"Only Yesterday: An Informal History of the 1920’s" by Fredrick Lewis Allen
The Austrian economists got it right decades ago. We're seeing exactly what Von Mises wrote about!
” It’s hard to even formulate a response for this one “
Many economists (or in the mind of Mr. Obama, ‘most economists’) are hampered by the fact that their visible horizon is limited to the diameter of their respective sphincters.....
Uhh, the collapse was brought on by constraining free markets with excessive regulation such as that which increased subprime lending in Clinton’s revision of Jimmy Carter’s CRA which reduced employment and income verification to such levels as to be a joke (you could count welfare or even child support you weren’t collecting from the other parent as earned income) and forced more sub-prime lending on the mortgage industry. Add in other destructive regulations like Sarbanes-Oxley which put in place mark to market accounting rules and only a moron would claim the financial collapse was brought on by the operation of the free market. It was brought on by constraints PLACED on the free market. Yes, I understand the role of derivatives, mortgage backed securities, etc. in the financial collapse. But the catalyst for those problems, the match that lit the fuse that blew it all up was sub prime lending forced on the mortgage industry by the government.
ummm, New York Times, and you expect something found there to make sense. Too whom exactly.
Third option: whore.
None of these university types know anything about derivatives.
They are out of date.
Next year, Madonna is getting one for chastity, Britney Spears is getting one for Physics and Charley Manson will be getting one for medicine.
A straw-man argument. I defy Krugman to name a prominent economist, who has written about "perfect markets" in he past 6 decades (except as a simplifying assumption, to begin to explain or explore some concept). Rational individuals”, for that matter — the usual premise is that most people are rational most of the time.
I agree about the mathematics though — there's been too much reliance on mathematical models of late. (Models, which are as fallible as the climate-change models; and for many of the same reasons.)
Alex, I’ll take “stupid” for 41,000,000,000,000,000.
Did they study economic?
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.
- The Black Swan:
- The Impact of the Highly Improbable
by Nassim Nicholas Taleb
Marx tried to predict it....BO is just pushing it along.
Socialists always assume production, always assume money will flow into gov't coffers like Manna.
Pretty much nails it. The profession has a lot of error in it, but Krugman would have you think he was the guy who go it right. If I had the time to go back over all the stuff he was putting out, I could index how far off the mark he was. Of course, since he is referred to as having won the Nobel (Memorial is not often mentioned) prize in Economics, those with superficial knowledge of the field (e.g., journalists) assume that along with the prize comes infallibility.
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