This isn't a question of economists focusing on things that were too abstract or that somehow these crises are just inherently unpredictable. This was caused by the widespread idea that you can legislate away economic problems e.g. 1% interest rates following the tech bubble. You can't subvert reality with clever accounting tricks. Eventually the chickens come home to roost.
Your right - there were a number of people predicting this, but when you had year on year growth, their voices seemed less relevant. I was guilty of this - I went to an Entrepreneurs dinner two years back where Jim Mellon, the guest speaker, basically told us that the economy was in for a huge downturn. But oddly enough, he was delivering his message in the wrong environment - all paid for dinner, swish restaurant, lots of nice wine - so I don't think we really registered what he was saying. He gave away free copies of his book, "Wake Up", and it now makes fairly prophetic reading.
Stop respecting the predictions of economists. It is a social science that pretends to be a hard science, with disastrous results. Can anyone justify the efficient market hypothesis after the current crisis? This is all explained very well in The Black Swan.
A crucial point in The Black Swam is that randomness is relative. Something that's random to you is not necessarily random to someone else (i.e. the dots in the sky were randomly distributed and unpredictable to many people a few thousand years ago.) It's all about how much knowledge you have about the system.
So don't listen to SOME economists, and keep in mind their track record of predictions. Not all economists are equally bad.
Reading articles like this is so infuriating...MANY economists (and non-economist bloggers) have been predicting this scenario for years. Saying "Ya, but they didn't tell us when it would happen, so they are no better than the others" is a total cop out. You would think that in a field that is largely (although not totally) scientific, when leading figures are shown to be so spectacularly wrong, that they might become at least slightly curious of the theories of people in other camps that predicted it. But instead, they essentially say no one could have predicted this. Bollocks. Lots of people predicted this. I daresay only a university educated economist could not see this coming. Any number of very simple mental experiments involving simple multiplication showed that what we've been experiencing was at least unsustainable, but they never even admitted to that.
"Already, the crisis is reshaping long-running debates. It has chastened believers in the self-correcting abilities of the free market - Alan Greenspan said as much before Congress in October - and emboldened those who see the need for more active government intervention."
> Well, it's not causing the proper debates, for example, which camp has the most correct theory? The Austrians told you this was coming, yet you still act like they don't exist, why is that? And as for the self-correcting abilities of the market, that's exactly what is happening now, and the reason it is so painful and shocking is because the natural correction was circumvented several times in the past.
"Today's crisis has brought Keynes back to the center of the discussion, but some economists also see it driving the field into new territory. Up until very recently, the study of market bubbles was marginalized - there was no widely accepted definition of what a bubble was, and some economists, believers in the complete rationality of markets, argued that bubbles didn't even exist."
> Well, can we finally agree that bubbles are possible and did exist? There certainly wasn't a "widely accepted" definition of a bubble, but there were many who defined one, and said we were in one. Should perhaps the people that couldn't decide before sit down and listen to the people that said we were in one so they can learn something for a change?
"Robert Lucas, an economist and Nobel laureate at the University of Chicago and a champion of the rationality of markets, doesn't see much fundamental change coming out of the crisis, either. What it has reminded us of, he argues, is simply the impossibility of seeing these events in advance. I don't know anybody involved who thought he could predict these turning points. Do macroeconomists know as much as we thought we did?" he asks. "Of course not."
> What a disgraceful display of intellectual dishonesty, or else outright ignorance, which would be even worse.
All of these children should be sent to their room and forced to read Murray Rothbard, Mish, Peter Schiff, etc and not come out until they can finally write a convincing essay on why we were obviously in a bubble.
http://www.youtube.com/watch?v=2I0QN-FYkpw
This isn't a question of economists focusing on things that were too abstract or that somehow these crises are just inherently unpredictable. This was caused by the widespread idea that you can legislate away economic problems e.g. 1% interest rates following the tech bubble. You can't subvert reality with clever accounting tricks. Eventually the chickens come home to roost.