Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

The Economics Profession Does Not Want to Make the Transition

That’s partly because most economists don’t believe there is anything all that fundamentally wrong with current economic theory. Yes, they argue, some tweaking may be needed, but there is no need for an entirely new theory.

And some economists, like Roman Frydman from New York University, think we can never forecast the economy with any accuracy. We’re tempted to respond with “What the hell are you doing in economics then?” It’s like a manager who tells you that his business is unprofitable because it never could be profitable, so don’t blame him.

So part of the problem in economics, as we mentioned before, is that economists are pretty happy in their current positions as professors and hence, in their current thinking that no fundamental change is necessary. Sounds a lot like the management of General Motors in the 1980s and 1990s, doesn’t it?

Mark Gertler, who previously worked with Ben Bernanke, but is now with New York University, feels that the economics profession is highly competitive, and if you have a better idea in economics it is going to win out. We agree with Mr. Gertler in the long run, but it’s not going to happen the way Mr. Gertler thinks.

That’s because getting a job in economics requires that you think the way other economists do—from a fundamental standpoint. Not that you can’t have disagreements in economics. You can have and are encouraged to have lots of little disagreements. But, in raising questions ...