The NYT had a piece comparing efforts to detect financial crises to efforts to detect earthquakes. This implies that some fundamental new methodology is needed.

In fact, the economic crisis was entirely predictable and predicted by people who understand economics. The more obvious problem is the incentive structure within the economics profession. It provides economists with no incentive to break with conventional wisdom even when it is obviously wrong and provides no sanction against those whose failure to break with conventional wisdom led to disastrous consequences for the economy and the country.

Unless this incentive structure is changed, no improvements in methodology will make any difference at all.

Please login to comment
  • No comments found

Site Maintenance

"The CEPR website currently takes longer to load than usual. We hope to have this and other issues addressed shortly. While this much needed site maintenance is taking place, our content is still available so please continue to slooowwwly surf the pages of our site. Thank you for your patience."