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Addressing Economic Crises: The Reference-Class Problem

Author

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  • Xavier De Scheemaekere
  • Kim Oosterlinck
  • Ariane Szafarz

Abstract

Addressing crises raises a sharp reference-class problem in economics. Namely, economic theory lacks an inclusive and consistent classification of crises. This problem stems from the fact that economists tend to adapt their views on crises to recent episodes, and omit averted and potential crises. They thus fail to imagine innovations in the forms crises can take. We identify three main factors that hamper the economic analysis of crises: the lack of imagination, sample biases, and the Peso problem. Using several historical examples, this paper argues that only an ex ante classification of crises derived from a conceptual approach would address the reference-class problem properly. Multiple-solution models offer a promising avenue to solve this problem.

Suggested Citation

  • Xavier De Scheemaekere & Kim Oosterlinck & Ariane Szafarz, 2012. "Addressing Economic Crises: The Reference-Class Problem," Working Papers CEB 12-024, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/127947
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    References listed on IDEAS

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    Cited by:

    1. Malcolm Warner, 2013. "The global economy in crisis: towards a new paradigm?," Asia Pacific Business Review, Taylor & Francis Journals, vol. 19(2), pages 157-161, April.

    More about this item

    Keywords

    Economic Crisis; Economic History; Single-Case Probability; Epistemology;

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • N00 - Economic History - - General - - - General

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