Since failing to predict the global economic crisis, economists have been accused of everything from ideological blindness to outright corruption. These charges deserve to be taken seriously, the true reason could be far more mundane – and thus far more worrisome.
CHICAGO – At the height of the financial crisis, the Queen of England asked my friends at the London School of Economics a simple question, but one for which there is no easy answer: Why did academic economists fail to foresee the crisis?
Several responses to that query exist. One is that economists lacked models that could account for the behavior that led to the crisis. Another is that economists were blinkered by an ideology according to which a free and unfettered market could do no wrong. Finally, an answer that is gaining ground is that the system bribed economists to stay silent.
In my view, the truth lies elsewhere.
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