Economics in Transition

Since the 2008 global financial crisis, there has been no shortage of criticism of conventional economics, with its rigid models and fanciful “representative agents,” which utterly failed to predict the collapse. But the critics often overlook the emergence of new approaches – some predating the crisis – that could redefine the mainstream of economic thinking.

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Andrew Lo, Adaptive Markets: Financial Evolution at the Speed of Thought, Princeton University Press
Richard Bookstaber, The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction, Princeton University Press
Roderick Floud, Santhi Hejeebu, and David Mitch, eds., Humanism Challenges Materialism in Economics and Economic History, University of Chicago Press

MANCHESTER – There seems to be no end to the tide of books criticizing economics, and – as I am an economist – it must make me something of a masochist that I keep reading them. The exercise is all the more wearisome as the criticisms are both repetitive and increasingly misdirected.

Not that everything about the state of economics is fine; far from it. But only if today’s critics of economics pay more attention to what economists are actually doing will they be able to make a meaningful contribution to assessing the state of the discipline.

A Royal Doubt

Ten years on from the financial crisis of 2007-2008, two of the most recent books criticizing economics and economists start with the question posed by Queen Elizabeth II on a 2008 visit to the London School of Economics: “Why did nobody see it coming?” (Indeed, almost all the recent examples of this literary genre start the same way.) The essays edited by Roderick Floud et al, Humanism Challenges Materialism, and Richard Bookstaber’s The End of Theory use Queen Elizabeth’s royal puzzlement to insinuate that the entire subject of economics is fundamentally flawed: “If economists couldn’t predict the biggest financial crisis in decades, what are they good for?”