In Defense of (Most) Economists, the Crash of 2008...............
“For the past couple of years, though, economics hasn't been fun. It's been scary. The quirky topics in which Levitt specializes have been pushed aside by the big questions of how to halt a financial crisis and fix an ailing global economy. Macroeconomics has overwhelmed microeconomics. Not that the macroeconomists have exactly covered themselves with glory. Queen Elizabeth II wondered aloud late last year how economists had missed the problems that brought on the financial crisis. This September, economist Paul Krugman lamented "the profession's blindness to the very possibility of catastrophic failures in a market economy," unleashing a bitter debate over what the heck economics is good for………” Time
All sounds interesting. Except that the worst economic crisis of our time was not really created by economists. It was created by MBAs and a few lawyers. (with maybe a tame economist and math major or two thrown in). Just look at the culprits in the banking and investment banking institutions. Few of them hold economic degrees. Almost all hold business degrees. They are taught in business school to go for the jugular whenever it is exposed, no matter whose jugular. Check the info on the CEOs and other management of Goldman Sachs, Morgan Stanley, Lehman (RIP), Merrill, Citigroup, B of A, etc, etc. I bet very few, if any, hold degrees in economics. I don't need to check and make sure: as an economist I am entitled to make certain assumptions. Business majors are not allowed, or trained, to make assumptions. Greed is based on facts, not assumptions.
Even the great decider and enabler of these CEOs, the screwer in chief, the president of the United States at the time, had a Harvard MBA. Besides, economists are usually not greedy types, unless they are of the conservative variety, which makes them honorary MBAs anyway.
Unfortunately some economists (traitors to the discipline) enabled these business types. Economists like Alan Greenspan and to a lesser extent Ben Bernanke were merely enablers. Old Maynard would have never let them get away with it. If economics is to blame, it was one particular school of thought that abetted it: the crash of 2008 was a crash of conservative, deregulatory, Friedmanesque, anything goes economics.
Of course that former Texas senator Phil Gramm is an economist, and he was ready to let the MBAs loose on the wounded economy to do even more damage as McCain’s Treasury Secretary. That was a close call.
(Maybe I should have had this posting peer read first).
Cheers
mhg
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