Why did most professional economists – and especially academic economists – fail to predict the financial meltdown? Wearing my hats of former chief economist for World Bank’s Latin American Region, and later for the International Finance Corporation, I was delighted to read Harold Meyerson’s article (below). He argues, rightly in my experience, that most economists are trapped in a fantasy universe, in which the laws of supply and demand ensure that bad things not only won’t happen, but cannot ever happen. I used to have a bumper sticker on my car in the 1970s: THE REAL WORLD IS A SPECIAL CASE. Even back then, academic economists were gaining credentials by dint of mathematical "models” they built, which were drifting toward a Cloud-Cookoo Land of total disconnect from real-world problems. Luckily for me, I am ungifted in maths and spent my time working with emerging markets' governments at trying to solve practical problems, and this saved me from irrelevancy.
A point similar to Myerson’s was made years ago by Professor David Colander, in a book felicitously entitled "Why Aren’t Economists As Important As Garbagemen? Essays on the State of Economics”.
Are Colander and Myerson right? I am looking forward to your views.
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Guy Pfeffermann is the founder and CEO of the Global Business School Network.