The Financial Crisis and the Systemic Failure of Academic Economics
AbstractThe 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 once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We 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 the research economists undertake, 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
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1489.
Length: 17 pages
Date of creation: Feb 2009
Date of revision:
financial crisis; academic moral hazard; ethic responsibility of researchers;
Other versions of this item:
- D. COLANDER & al., 2010. "The Financial Crisis and the Systemic Failure of Academic Economics," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
- David Colander & Hans Föllmer & Armin Haas & Michael Goldberg & Katarina Juselius & Alan Kirman & Thomas Lux & Birgitte Sloth, 2009. "The Financial Crisis and the Systemic Failure of Academic Economics," Discussion Papers 09-03, University of Copenhagen. Department of Economics.
- David Colander & Hans Föllmer & Armin Haas & Michael Goldberg & Katarina Juselius & Alan Kirman & Thomas Lux & Brigitte Sloth, 2009. "The Financial Crisis and the Systemic Failure of Academic Economics," Middlebury College Working Paper Series 0901, Middlebury College, Department of Economics.
- A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
- B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-HPE-2009-03-14 (History & Philosophy of Economics)
- NEP-PKE-2009-03-14 (Post Keynesian Economics)
- NEP-SOG-2009-03-14 (Sociology of Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Masanao Aoki, . "Reconstructing Macroeconomics: A Perspective from Statistical Physics and Combinatorial Stochastic Processes," UCLA Economics Online Papers 390, UCLA Department of Economics.
- Jan Pieter Krahnen, 2005.
"Der Handel von Kreditrisiken: Eine neue Dimension des Kapitalmarktes,"
Perspektiven der Wirtschaftspolitik,
Verein für Socialpolitik, vol. 6(4), pages 499-519, November.
- 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.
- Jan Pieter Krahnen, 2005. "Der Handel von Kreditrisiken: Eine neue Dimension des Kapitalmarktes," CFS Working Paper Series 2005/05, Center for Financial Studies.
- David Hendry & Hans-Martin Krolzig, 2003.
"The Properties of Automatic Gets Modelling,"
Economics Series Working Papers
2003-W14, University of Oxford, Department of Economics.
- David Hendry & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Economics Papers 2003-W14, Economics Group, Nuffield College, University of Oxford.
- Hendry, David F & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Royal Economic Society Annual Conference 2003 105, Royal Economic Society.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," NBER Working Papers 13882, National Bureau of Economic Research, Inc.
- 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.
- Jan Pieter Krahnen & Christian Wilde, 2006. "Risk Transfer with CDOs and Systemic Risk in Banking," CFS Working Paper Series 2006/04, Center for Financial Studies.
- 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.
- Kevin D. Hoover & Katarina Juselius & Søren Johansen, 2007.
"Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression,"
07-35, University of Copenhagen. Department of Economics.
- Kevin D. Hoover & Soren Johansen & Katarina Juselius, 2008. "Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression," American Economic Review, American Economic Association, vol. 98(2), pages 251-55, May.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Olaf Storbeck smackdown watch, nobel prize edition
by Olaf Storbeck in Economics Intelligence on 2011-10-13 07:37:01
- A Nobel Prize for the Ancien RÃ©gime
by Olaf Storbeck in Economics Intelligence on 2011-10-11 08:26:44
- Economics 2.0: a review
by chris dillow in Stumbling and Mumbling on 2009-03-30 13:29:57
- Is de economische wetenschap verantwoordelijk voor het ontstaan van de kredietcrisis?
by Hans Blommestein in Me Judice on 2009-11-25 12:00:00
- Temporary Crisis or Paradigm Shift?
by matthiasgreiff in Matthias Greiff on 2009-10-19 18:50:21
- Where are the Development Political Scientists?
by admin in NL-Aid on 2012-08-15 09:00:13
- The problems with economists: they dont understand development
by Seth Kaplan in Global Dashboard on 2012-09-19 17:39:27
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statistics
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.