<blockquote>"Nassim Nicholas Taleb, author of The Black Swan, says, "We have to build a society that doesn't depend on the forecasts by idiotic economists."
Taleb is also right.
Some economists — those versed in Austrian business-cycle theory — did predict this crisis.(
pdf) Those who didn't see it coming might be considered "idiotic."
Next, finance expert Paul Wilmott asserts that "Economists' models are just awful. They completely forget how important the human element is."
Right again. Mainstream economists depend on mathematical models for understanding economic relationships. The false precision of the models may give them intellectual comfort, but the models provide a mechanical view of economic decision making. While Austrian theorists are focused on human action (Austrians call this analysis "praxeology"), the modelers overlook the purposeful behavior of decision making. Models fail to incorporate the full spectrum of human decisions, giving us, at best, an incomplete view of economic relationships (for an explanation of the limitations of economic modeling, see Gene Callahan's
"Models: What Are They Good For?"). Recent events show that models can show us trends in economic variables, but have difficulty predicting changes in these trends.
The BusinessWeek article also takes a swipe at the last two chairmen of the Federal Reserve. Coy notes that before the collapse, Alan Greenspan argued that there was no housing bubble, and admitted in his Senate testimony last year that his earlier pronouncements regarding the soundness of our economy were flawed."(
pdf)
- Mark Brandly,
Should People Just Ignore Economists? 5/5/2009</blockquote>
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Current Crisis Shows Uncanny Parallels to Great Depression - 04/29/2009
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Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says (Update1) - May 7, 2009
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Guest post: Economic recovery and the perverse math of GDP reporting, May 7, 2009