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Not a great opinion piece with an overly-dramatic title. The forecasting failures of major world economic bodies leading up to the 2008 financial crisis were (

Not a great opinion piece with an overly-dramatic title. The forecasting failures of major world economic bodies leading up to the 2008 financial crisis were (and somewhat still are) widely examined and criticized. > https://www.economist.com/free-exchange/2011/02/11/the-warning-signs-they-missed https://www.economist.com/free-exchange/2011/02/11/the-warni... From that article a choice quote from a referenced report: > "In the United States, for example, it did not discuss, until the crisis had already erupted, the deteriorating lending standards for mortgage financing, or adequately assess the risks and impact of a major housing price correction on financial institutions…As late as April 2006, shortly before U.S. housing prices peaked, the WEO and the GFSR explained away the rising share of non-traditional mortgages in the United States thus: “Default rates on residential mortgage loans have been low historically. Together with securitization of the mortgage market, this suggests that the impact of a slowing housing market on the financial sector is likely to be limited." So to say that Economists still "don't get" the 2008 crisis is a somewhat heavy rose-colored embellishment of the actual state of the field.

sounds 8y ago
In 20/20 hindsight, someone in some report somewhere pointed at something the WEO and GFSR did and said, "See? Now we know what we did wrong." It sounds like more of the same. It sounds like more "trust us, we won't mess it up this time around." It doesn't sound like a fundamental re-thinking of our economy.
gmiller123456 8y ago
>Not a great opinion piece with an overly-dramatic title This is one of those pieces where they claim experts don't understand their own field, so they quote experts from that same field to back up that idea.
mcguire 8y ago
"So to say that Economists still "don't get" the 2008 crisis is a somewhat heavy rose-colored embellishment of the actual state of the field." Have economists actually changed their models, or are they still referring to the 2008 crisis as an unexpected shock? What are the chances that their "understanding" of the 2008 crisis will prevent them from being surprised by the next one?
- gshulegaard 8y ago
  The 2008 financial crisis is a pretty expansive event but it's unclear whether or not Economists were "surprised" to the extent the public has been led to believe by somewhat biased media coverage. For example, the quote from my original comment was from an internal report by the IMF on the IMF's own forecasting/reporting in the period leading up to the financial crisis. It even calls out a presentation made by it's Chief Economist (at the time) which warned against risky behavior that was wholesale ignored by the fund's management (from the Economist article before): > Even when some of its officials had different ideas, the fund's management seemed not to be listening. Its then chief economist, Raghuram Rajan, concluded a presentation at the annual Jackson Hole conference of central bankers in 2005 by arguing that “we should be prepared for the low probability but highly costly downturn”. But the IMF now admits that: > "Despite the importance of the Economic Counsellor's position, there was no follow up on Rajan's analysis and concerns— his views did not influence the IMF's work program or even the flagship documents issued after the Jackson Hole speech." That presentation by Raghuram Rajan is now fairly well known as having fairly accurately predicted the crisis (in 2005) but fell on ears deafened by prosperity (he was the Chief Economist at the IMF and IMF Management completely dismissed it). Here he is on a different list of 6 economists who "predicted the global financial crisis": https://www.intheblack.com/articles/2015/07/07/6-economists-who-predicted-the-global-financial-crisis-and-why-we-should-listen-to-them-from-now-on https://www.intheblack.com/articles/2015/07/07/6-economists-... He later went on to be the 23rd governor of the Reserve Bank of India. I am by no means an expert on the subject so take this all as a layman's loose following of the topic...but it seems to me that the lack of recognition of the dangers by Economists is only part of the problem. It also seems that many major organizations were incentivized to turn a blind eye or even actively downplay concerns in the face of overwhelming financial growth. Even before the crisis, there were Economists writing about the dangers[1] (2006); so to say the entire field of Economics were completely blindsided is itself a bit of an exaggeration. In reality, many large Economic organizations were incentivized to downplay concerns by rampant growth. No one wants to be the one that says, "Hey let's slow down," when the economy is booming. [1] http://keenomics.s3.amazonaws.com/debtdeflation_media/2007/03/SteveKeenDebtReportNovember2006.pdf http://keenomics.s3.amazonaws.com/debtdeflation_media/2007/0...

sounds 8y ago

In 20/20 hindsight, someone in some report somewhere pointed at something the WEO and GFSR did and said, "See? Now we know what we did wrong." It sounds like more of the same. It sounds like more "trust us, we won't mess it up this time around." It doesn't sound like a fundamental re-thinking of our economy.

gmiller123456 8y ago

>Not a great opinion piece with an overly-dramatic title This is one of those pieces where they claim experts don't understand their own field, so they quote experts from that same field to back up that idea.

mcguire 8y ago

"So to say that Economists still "don't get" the 2008 crisis is a somewhat heavy rose-colored embellishment of the actual state of the field." Have economists actually changed their models, or are they still referring to the 2008 crisis as an unexpected shock? What are the chances that their "understanding" of the 2008 crisis will prevent them from being surprised by the next one?

gshulegaard 8y ago
The 2008 financial crisis is a pretty expansive event but it's unclear whether or not Economists were "surprised" to the extent the public has been led to believe by somewhat biased media coverage. For example, the quote from my original comment was from an internal report by the IMF on the IMF's own forecasting/reporting in the period leading up to the financial crisis. It even calls out a presentation made by it's Chief Economist (at the time) which warned against risky behavior that was wholesale ignored by the fund's management (from the Economist article before): > Even when some of its officials had different ideas, the fund's management seemed not to be listening. Its then chief economist, Raghuram Rajan, concluded a presentation at the annual Jackson Hole conference of central bankers in 2005 by arguing that “we should be prepared for the low probability but highly costly downturn”. But the IMF now admits that: > "Despite the importance of the Economic Counsellor's position, there was no follow up on Rajan's analysis and concerns— his views did not influence the IMF's work program or even the flagship documents issued after the Jackson Hole speech." That presentation by Raghuram Rajan is now fairly well known as having fairly accurately predicted the crisis (in 2005) but fell on ears deafened by prosperity (he was the Chief Economist at the IMF and IMF Management completely dismissed it). Here he is on a different list of 6 economists who "predicted the global financial crisis": https://www.intheblack.com/articles/2015/07/07/6-economists-who-predicted-the-global-financial-crisis-and-why-we-should-listen-to-them-from-now-on https://www.intheblack.com/articles/2015/07/07/6-economists-... He later went on to be the 23rd governor of the Reserve Bank of India. I am by no means an expert on the subject so take this all as a layman's loose following of the topic...but it seems to me that the lack of recognition of the dangers by Economists is only part of the problem. It also seems that many major organizations were incentivized to turn a blind eye or even actively downplay concerns in the face of overwhelming financial growth. Even before the crisis, there were Economists writing about the dangers[1] (2006); so to say the entire field of Economics were completely blindsided is itself a bit of an exaggeration. In reality, many large Economic organizations were incentivized to downplay concerns by rampant growth. No one wants to be the one that says, "Hey let's slow down," when the economy is booming. [1] http://keenomics.s3.amazonaws.com/debtdeflation_media/2007/03/SteveKeenDebtReportNovember2006.pdf http://keenomics.s3.amazonaws.com/debtdeflation_media/2007/0...