Monday, 1 October 2012

What have the economists ever done for us?

This question is asked by one Andrew G Haldane, Executive Director, Financial Stability, Bank of England in a column at Haldane argues that there is a long list of culprits when it comes to assigning blame for the financial crisis. His column argues economists are among the guilty, having succumbed to an intellectual virus of theory-induced blindness. It adds this calls for an intellectual reinvestment in models of heterogeneous, interacting agents, following in the footsteps of other social scientists. This will require a sense of academic adventure sadly absent in the pre-crisis period.

I would make two quick points to Mr Haldrane: 1) if he wants culprits for the financial crisis he should look at lot closer to home, at financial regulators and 2) has he ever thought, and I'm sure he hasn't, that the whole idea of macro is fundamentally flawed? No matter what models they come up with macro will never work. What is important really is what is happening at the micro level and this is lost via aggregation.

1 comment:

Mark Hubbard said...

An economist once helped my wife change her tyre. That was useful :)