Monday, February 21, 2011

Why Did Economists Not Foresee The Financial Crisis?

One of the critical issues that has arisen from the Financial Crisis and its aftermath was why didn't economists foresee the Crisis?

While I believe there are many reasons for this, some complex, it is interesting to read of reasons issued by one of today's foremost economists, Raghuram Rajan, in his February 5 2011 blog post.

While his entire blog post on the issue is worthwhile, the following excerpt is key:
"I would argue that three factors largely explain our collective failure:  specialization, the difficulty of forecasting, and the disengagement of much of the profession from the real world."
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I have collected a variety of economic forecasts and opinions during the period preceding and during the Financial Crisis on a page titled "Predictions."
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A Special Note concerning our economic situation is found here
SPX at 1343.01 as this post is written

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