Reinventing Economics
The failure of economists’ models to forecast the current crisis will mark the beginning of their overhaul, which will happen as economists’ redirect their research efforts by listening to scientists with different expertise. Only then will monetary authorities gain a better understanding of when and how speculative bubbles can derail an economy, and what can be done to prevent it.
NEW HAVEN – The widespread failure of economists to forecast the financial crisis that erupted in 2008 has much to do with faulty models. This lack of sound models meant that economic policymakers and central bankers received no warning of what was to come.