Economists beat themselves up for missing the meltdown:
"We believe that economics has been trapped in a sub-optimal equilibrium in which much of its research efforts are not directed towards the most prevalent needs of society. Paradoxically self-reinforcing feedback effects within the profession may have led to the dominance of a paradigm that has no solid methodological basis and whose empirical performance is, to say the least, modest. Defining away the most prevalent economic problems of modern economies and failing to communicate the limitations and assumptions of its popular models, the economics profession bears some responsibility for the current crisis. It has failed in its duty to society to provide as much insight as possible into the workings of the economy and in providing warnings about the tools it created. It has also been reluctant to emphasize the limitations of its analysis. We believe that the failure to even envisage the current problems of the worldwide financial system and the inability of standard macro and finance models to provide any insight into ongoing events make a strong case for a major reorientation in these areas and a reconsideration of their basic premises."
They shouldn't beat themselves up over missing this one most of them miss EVERY downturn. I remember a stat back in 2002 that over 60% of economists polled thought we'd avoid recession when the data later showed we'd already been in one for months. Polls of the public usually a reliable indicator than those of economists.
This time around they suffered from the same problem as Wall Street banks, they relied on mathmatical models that were fundamentally faulty, when simple common sense showed a different outcome.
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They shouldn't beat themselves up over missing this one most of them miss EVERY downturn. I remember a stat back in 2002 that over 60% of economists polled thought we'd avoid recession when the data later showed we'd already been in one for months. Polls of the public usually a reliable indicator than those of economists.
This time around they suffered from the same problem as Wall Street banks, they relied on mathmatical models that were fundamentally faulty, when simple common sense showed a different outcome.