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The Financial Crisis and the Systemic Failure of Academic Economics

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  • D. COLANDER
  • al.

Abstract

The authors of the article claim that the economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions. In their view, this lack of understanding is due to a misallocation of research efforts in economics. They trace the deeper roots of this failure to the profession’s insistence on constructing models that, by design, disregard the key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in economic research, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.

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Bibliographic Info

Article provided by N.P. Redaktsiya zhurnala "Voprosy Economiki" in its journal Voprosy Economiki.

Volume (Year): 6 (2010)
Issue (Month): ()
Pages:

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Handle: RePEc:nos:voprec:2010-06-2

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Web page: http://www.vopreco.ru/eng/year.html

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  1. D. COLANDER & al., 2010. "The Financial Crisis and the Systemic Failure of Academic Economics," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
  2. Krahnen, Jan Pieter & Wilde, Christian, 2006. "Risk Transfer with CDOs and Systemic Risk in Banking," CEPR Discussion Papers 5618, C.E.P.R. Discussion Papers.
  3. Jan Pieter Krahnen, 2005. "Der Handel von Kreditrisiken: Eine neue Dimension des Kapitalmarktes," Working Paper Series: Finance and Accounting 152, Department of Finance, Goethe University Frankfurt am Main.
  4. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  5. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164, September.
  6. Jan Pieter Krahnen & Christian Wilde, 2008. "Risk Transfer with CDOs," Working Paper Series: Finance and Accounting 187, Department of Finance, Goethe University Frankfurt am Main.
  7. Hendry, David F & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Royal Economic Society Annual Conference 2003 105, Royal Economic Society.
  8. Barry Eichengreen, 2008. "Origins and Responses to the Current Crisis," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 9(4), pages 6-11, December.
  9. Kevin D. Hoover & Katarina Juselius & Søren Johansen, 2007. "Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression," Discussion Papers 07-35, University of Copenhagen. Department of Economics.
  10. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," CEMA Working Papers 595, China Economics and Management Academy, Central University of Finance and Economics.
  11. Cogley, Timothy & Sargent, Thomas J., 2008. "The market price of risk and the equity premium: A legacy of the Great Depression?," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 454-476, April.
  12. Frydman Roman & Goldberg Michael D., 2008. "Macroeconomic Theory for a World of Imperfect Knowledge," Capitalism and Society, De Gruyter, vol. 3(3), pages 1-78, December.
  13. Masanao Aoki, . "Reconstructing Macroeconomics: A Perspective from Statistical Physics and Combinatorial Stochastic Processes," UCLA Economics Online Papers 390, UCLA Department of Economics.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Olaf Storbeck smackdown watch, nobel prize edition
    by Olaf Storbeck in Economics Intelligence on 2011-10-13 07:37:01
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  3. Economics 2.0: a review
    by chris dillow in Stumbling and Mumbling on 2009-03-30 13:29:57
  4. Is de economische wetenschap verantwoordelijk voor het ontstaan van de kredietcrisis?
    by Hans Blommestein in Me Judice on 2009-11-25 12:00:00
  5. Temporary Crisis or Paradigm Shift?
    by matthiasgreiff in Matthias Greiff on 2009-10-19 18:50:21
  6. Where are the Development Political Scientists?
    by admin in NL-Aid on 2012-08-15 09:00:13
  7. The problems with economists: they don’t understand development
    by Seth Kaplan in Global Dashboard on 2012-09-19 17:39:27
  8. Time to democratize science?
    by ? in Backreaction on 2010-12-16 16:50:00
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