How the Entire Economics Profession Failed WITHOUT Mea Culpas...

[kpete]

At the annual meeting of American Economists, most everyone refused to admit their failures to prepare or warn about the second worst crisis of the century.

How the Entire Economics Profession Failed

by Jeff Madrick

“No one questioned their contribution to the current frightening state of affairs, no one humbled by events.”

....................

The sessions dedicated to what caused the crisis were filled, even those few sessions led by radical economists, who never saw turnouts for their events like the ones they just got. But no one was accepting any responsibility.

I found no one fundamentally changing his or her mind about the value of economics, economists, or their own work. No one questioned their contribution to the current frightening state of affairs, no one humbled by events.

Maybe I missed it all. There were hundreds of sessions. I asked others. They hadn’t heard any mea culpas, either.

Here’s what mainstream economists overwhelmingly—with only a few exceptions—ignored or believed was acceptable and even healthy economic behavior that contributed rather than detracted from prosperity:

• Wall Streeters paid themselves enormous bonuses based on rising market values of investments, not on revenues actually made. The bonus system has been based on the preposterous assumption that the value of an investment set by traders in financial markets rationally reflects the true future value of that asset almost all the time.

• Investment banks took on $25 to $40 of debt for every dollar of capital in order to maximize their returns. It was assumed that these smart people wouldn’t do this if they didn’t know how to manage their risk.

• Financial firms that were not regulated or overseen by the Federal Reserve or any other Washington watchdog agency lent four out of five dollars of lending to business and consumers. Economists as a group raised no concern and in truth went along without serious questioning.

• Average Americans took on record amounts of debt compared to incomes, which was said to be just fine because it was supported by high stock prices and, when that bubble burst, by high house prices.

• The earnings of financial institutions rose to more than one-third of all American profits. This only proved how valuable finance was to the economy and that manufacturing was simply old hat.

more at:
http://www.thedailybeast.com/blogs-and-stories/2009-01-08/how-the-entire-economics-profession-failed/

[malaise]

1. That's not fair

There are many economists who rejected Friedman's bullshit from day one.
True many sold out or were shoved out of universities, but way more blame goes to college and university administrators who undermined economics departments and pushed the business schools and management studies departments with the sole agenda of vilifying the role of government.

I know more than a few economists (including hubby) who rejected neo-liberal bullshit from day one.


Madrick got this one wrong.

[Veritas_et_Aequitas]

3. Amen to that! nt

[kentuck]

2. Our government failed us on all fronts.

You name it and they failed to address it in a rational way.

[bbgrunt]

4. don't expect the entrenched corporate interests (and

academe is now a formidable member) to ever apologise.