David Brooks of the New York Times wrote an interesting column on Friday. He points out - as have several other prominent economists - that modern economics essentially failed to forecast the economic catastrophe of 2008-2009. Here's a paragraph from his column:
In The Wall Street Journal, Russ Roberts of George Mason University wondered why economics is even considered a science. Real sciences make progress. But in economics, old thinkers cycle in and out of fashion. In real sciences, evidence solves problems. Roberts asked his colleagues if they could think of any econometric study so well done that it had definitively settled a dispute. Nobody could think of one.
“The bottom line is that we should expect less of economists,” Roberts wrote.
In a column called “A Crisis of Understanding,” Robert J. Shiller of Yale pointed out that the best explanation of the crisis isn’t even a work of economic analysis. It’s a history book — “This Time is Different” by Carmen M. Reinhart and Kenneth S. Rogoff — that is almost entirely devoid of theory.I read "This Time is Different" and found it very interesting, albeit a little dry. The authors' essential point is that nearly every financial crisis over the last 500 years tends to follow the same pattern.
Worth a read.
Op-Ed Columnist - After the Financial Crash, the Return of History - NYTimes.com