When people start talking about the financial crisis or the very slow economy, there is always a tendency to want to blame someone. The usual suspects are Federal Reserve chairmen, past and present, individual investment bankers, all investment bankers, Congress, the president, and so on. Although all of these people share blame, some more than others, for our economic problems, it is usually only a partial answer. We could change the Fed chairman, but would that make that much difference? We could put some investment bankers in jail—and maybe they should go—but is that really the heart of the problem? We wish it were so easy, but it is doubtful that such changes will really turn the fundamental economy around.
The real culprit is more important than any of these individuals or groups of individuals. The real culprit is economists. What we are witnessing now is a fundamental failure of the economics profession. Understanding this failure and how to resolve it will create a powerful tool for solving our current and future economic problems.
If You Don’t Understand Why an Economy Grows, You Can’t Understand Why It Doesn’t Grow
The fundamental failure of economics goes beyond simply not seeing the crisis before it happened, or not warning of it, or not telling us how to prevent it. The even bigger failure is a fundamental lack of understanding of how the economy works. Economists don’t really ...