Wednesday, January 27, 2010

still busy making up isht....,

Newsweek | Economists aren't typically an emotional bunch. The dismal science attracts more sober-suited math geeks than poetic seekers. But in Atlanta earlier this month, the annual meeting of the American Economic Association was home to more soul-searching than number crunching. Hundreds of the profession's most eminent thinkers turned out to hear panel after panel discuss how, exactly, they'd gotten things so wrong. Why did most of the world's top economists fail to forecast the financial crisis? Should the teaching of economics in universities be entirely rethought? While past stars at the AEA have been conservative, finance--oriented intellectuals like Eugene Fama, this year's meeting belonged to the liberal realists—Paul Krugman, Robert Shiller, and the man of the hour, Nobel laureate Joseph Stiglitz. Stiglitz delivered a keynote debunking the profession's key tenet—namely, that markets can be trusted. Leading into the crisis, Stiglitz said, "markets were not efficient and not self-correcting, and now huge costs in the trillions of dollars are being borne by every part of society."

The hand-wringing will continue this week at the World Economic Forum in Davos, Switzerland. Last year the buzz at Davos focused on how to pull the world back from the brink. But the key topic this time will be the crisis of conscience in economics itself. For the first time in decades, the profession is rethinking all the big questions. How do we create growth? How do we raise employment? How do we spread wealth? At least since Reagan, the consensus was that you just had to make the pie grow, and the best way to do that was to unshackle markets and investors, and then get out of the way. Wealth, and thus health, happiness, and all other good things, would eventually trickle down to all.