Tuesday, January 31, 2012

They said it - we didn't 3

The usual criticism of economists is that they missed the crisis, preferring their models to reality, and those models took no account of the mischief that could be caused by unregulated bankers running wild. Of all explanations, this is the most comforting; all academics need to do , presumably, is try a little harder next time. But economists didn't just fail to spot the financial crisis – they helped create it. They provided the intellectual framework and drew up the policies that helped caused the boom – and the bust. Yet rather than a full-blown investigation, their active involvement in this crisis and their motivations have barely got a look-in. As Philip Mirowski, one of the world's leading historians of economic thought, puts it: "The bankers have got off the hook, and gone back to business as usual – and so too have the economists." It's the same discipline that spoke all that nonsense about markets always being efficient that is now deciding how to reform the economy.

"Most economists are deluded." explains Steve Keen professor in economics and finance at the University of Western Sydney, author of Debunking Economics

Aditya Chakrabortty, columist of the Guardian writes ".. that the current economic system as a bankocracy run by the banks, for the banks. Mainstream economists play the role of a secularised priesthood, explaining to the laity just how and why the markets' will must be done...."

Think about the rewards for toeing the mainstream economic line. Publication in prestigious journals. Early professorships at top universities. The conferences, the consultancies at big banks, the speaking fees. And then: the solicitations of the press, the book contracts. Rob Johnson, director of the Institute of New Economic Thinking, quotes a dictum he was once given by a leading west coast economist. "If you got behind Wall Street," he remembers the professor telling him, "you went to Lake Como every summer. If you left finance alone, you took a nice vacation in California. And if you took on the bankers, you drove a secondhand car."


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