“Why did no one see the crisis coming?” Queen Elizabeth asked last year. “A failure of the collective imagination of many bright people” who were all “doing their job properly on its own merit”, was the answer many of those bright people gave in a letter to the Queen last week.
If the economics profession could not warn the public about the credit crunch and the recession, what is the profession’s raison d’etre? Did this reflect, as some claim, that economics has gone astray with models that no longer help understand economic reality but rather distort it? Did such models even contribute to the crisis? FT writers and outside experts will set out their views in the posts below. What is the point of economists? What do you think? Click on the “comment” button to take part.
Samuel Brittan: Economists shuffle the deckchairs
What matters is whether economists can identify significant turning points and systemic failures in good time. They cannot. This does not mean the subject is valueless.
Robert Skidelsky: How to rebuild a shamed subject
Since the future a year ago included the present slump, it is natural that the failure of the economics profession – with a few exceptions – to foresee the coming collapse should have discredited its scientific pretensions. Economics is revealed to have no more clothes than other social science.
David Marsh: Economists serve no great purpose
They are an appendage of modernity that has proliferated since the second world war, like pizza parlours or speak-your-weight- machines at railway stations. But now that we have them, we cannot do without them.
Robert Shrimsley’s Notebook: Royal flush
A group of economists has written to the Queen in reply to her question on why they failed to predict the credit crunch. Madam. When you visited us last year you asked why economists were so useless – although you were kind enough not to put it that way. Naturally we have given much thought to this matter.
Paul De Grauwe: The crushing responsibility of economists
Clearly the financial crisis is not only due to the delusions of macroeconomists. The delusions were quite widespread among bankers, supervisors, media and policymakers. Yet society expects the community of scientists to be less prone to delusions than the rest. In that sense the responsibility of the economics profession is crushing.
Robin Harding: If economists try to predict crises they will get it wrong
It was in their warnings that economists failed: plenty talked of ‘global imbalances’ or ‘excessive credit growth’; few followed that through to the proximate sources of danger in the financial system, and then forcibly argued for something to be done about it.
FT editorial: No economic theory can perform the feats its users expect of it
Economics is unlikely ever to be very good at predicting the future. Too much of what happens in an economy depends on what people expect to happen. Even state-of-the-art forecasts are therefore better guides to the present mood than the future. though they may also be self-fulfilling prophecies.
George Magnus: Economists were beholden to the long boom
The credit crunch and its aftermath were not only foreseen, but several economists were pretty good with their timing too. This suggests a wider refusal to recognise the build-up to the bust, rather than a failure to see it coming.