The trouble with economists - Macleans.ca

The trouble with economists

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Stephen Harper, Sept. 15, 2008“My own belief is if we were going to have some sort of big crash or recession, we probably would have had it by now.”

Stephen Harper, Sept. 26, 2008“The only way there is going to be a recession is if they’re elected, and that’s why they’re not going to be elected.”

Paul Krugman, SundayFew 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… As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth …  the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.