Forbes: Doomsayers--Or Realists?

[marmar]

Doomsayers--Or Realists?
Nouriel Roubini, 06.04.09, 12:01 AM EDT

The economic crisis and the science of economics.


I recently gave a talk at a conference organized by the Perimeter Institute (a leading theoretical physics research institution in Canada) on the implications of the economic crisis for the science of economics--specifically, the failure to predict financial crises and recessions. (The video of the talk is available here.)

The talk is a bit wonky and academic, but it provides some useful insight on why most failed to predict this crisis and what the lessons are for the economic profession. Actually, the economic literature is full of theoretical and empirical studies of financial crises (debt crisis, sovereign debt crises, systemic banking crises, currency crises, systemic household and corporate debt crises, asset and credit booms/bubbles and busts/crashes) and systemic risk.

Thus connecting this analytical and empirical literature to a careful analysis of the data would have suggested that the worst financial and economic crisis since the Great Depression was not a "Black Swan" event but rather a "White Swan." In other words, it was not a random drawing from a distribution of events with a fat tail but actually predictable in advance given the rising macro and financial risks and vulnerabilities.

There were many economists and analysts who actually predicted, early on, many risks and vulnerabilities that would have led to a crisis. In many ways, I simply connected the dots in these different strands of thinking and warnings. ..........(more)

The complete piece is at: http://www.forbes.com/2009/06/03/recession-obama-renminbi-north-korea-nuclear-iran-opinions-columnists-roubini.html?feed=rss_opinions

[Deja Q]

1. Well, they've advocated offshoring and not thinking that without jobs, people couldn't pay bills...

:confused:

:shrug: