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On the economic crisis and the crisis of economics

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  • Beker, Victor A.

Abstract

The outburst of the 2008 global economic crisis sparked a myriad of criticism on mainstream neoclassical economic theory, held responsible for not even have considered the possibility of the kind of collapse that the subprime mortgage meltdown unleashed. In this paper, it is argued that what happened was a case of malpractice by hundreds of economists in banks and rating agencies who created and certified as almost risk-free securities assets that were actually highly risky as the events after 2007 overwhelmingly showed. Such a massive case of malpractice denounces deep failures in the regulatory system. The deregulation movement that took place during the 1980s and 1990s was inspired by an almost religious belief in the power of market forces to solve any economic problem. Neoclassical economics can be blamed for creating the ideological climate which stimulated the deregulation movement in the U.S.A during those decades. After discussing some aspects of economics methodology, arguing the need to approach the economy as an interactive complex system, and discussing the use of mathematics in economics, it is argued that the main object of economists' efforts should be economic illness rather than economic health. Finally, a list of 15 guidelines is sketched out for improving the methodological approach as well the contents of economic analysis.

Suggested Citation

  • Beker, Victor A., 2010. "On the economic crisis and the crisis of economics," Economics Discussion Papers 2010-18, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201018
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    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2010-18
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    File URL: https://www.econstor.eu/bitstream/10419/36658/1/630979766.pdf
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    Citations

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    Cited by:

    1. Beker, Victor, 2014. "On the European debt crisis," MPRA Paper 59869, University Library of Munich, Germany.
    2. Christian Grimm & Jakob Kapeller & Stephan Puehringer, 2017. "Zum Profil der deutschsprachigen Volkswirtschaftslehre: Paradigmatische Ausrichtung und politische Orientierung deutschsprachiger Oekonom_innen (On the current state of German-speaking Economics: Para," ICAE Working Papers 70, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    3. repec:bus:jphile:v:10:y:2016:i:1:n:2 is not listed on IDEAS
    4. Karl M. Beyer & Christian Grimm & Jakob Kapeller & Stephan Puehringer, 2017. "Der 'deutsche Sonderweg' im Fokus: Eine vergleichende Analyse der paradigmatischen Struktur und der politischen Orientierung der deutschen und US-amerikanischen Oekonomie (The 'German special path': A," ICAE Working Papers 71, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    5. Christian Grimm & Jakob Kapeller & Stephan Puehringer, 2018. "Paradigms and Policies: The state of economics in the german-speaking countries," ICAE Working Papers 77, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    6. Stavros A. DRAKOPOULOS, 2016. "Economic crisis, economic methodology and the scientific ideal of physics," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 10(1), pages 28-57, November.

    More about this item

    Keywords

    Economic crisis; malpractice; bounded rationality; complexity; economic anomalies; microfoundations; regulation;

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists

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