Friday, August 03, 2012

An economist admits fault

A bank of England economist has blamed economists for the financial crisis. His reasoning?

“I think one of the great errors we as economists made was that we started believing the assumptions of economics, and saying things that made no intellectual sense. We started to believe that what were assumptions were actually a description of reality, and therefore that the models were a description of reality, and therefore were dependable for policy analysis.

“With hindsight, that was a pretty significant error.”

(Emphasis added).

Non-economists have known for a long time that the basic, underlying assumptions of economics - omniscience, rationality, total self-interest - are bunk. The question now is whether this crisis will cause the profession to wake up to that fact, or whether they'll cling to their discredited ideology like millennial Christians after a predicted end of the world fails to occur. Either way, the message is pretty clear: we should stop listening to them until they start talking sense.