On the Economic Crisis and the Crisis of Economics

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in On the Economic Crisis and the Crisis of EconomicsVictor A. Beker University of Belgrano and University of Buenos AiresAbstract 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.JEL B41, A11

The Focus of Academic Economics: Before and after the Crisis

“…Second, some critics maintain that economists' efforts to influence economic policy and business practices have effectively contributed to the crisis. For example, economists argued in favour of deregulating financial markets (Beker 2010, Elster 2009, Kotz 2009) and assisted in introducing formal models for price prediction that fostered herd behaviour (Akerlof/Shiller 2009, Ouarda et al 2013) and control illusion (Colander et al 2009). In addition, some economists are exposed to conflicts of interests in the course of advising companies that operate in financial markets (Carrick-Hagenbarth/Epstein 2012, Krugman 2009 or by legitimising risky financial practices in general (Zingales 2014).…”

What economics education is missing: the real world

“…The criticism advanced against the current state of economics was manifold. Modern economics was, first, accused of being unable to understand and explain a wide range of real-world phenomena due to its strong focus on methodological rigor and monist paradigmatic structure (Beker, 2010; Colander et al , 2009). Second, recent studies have also formulated a critique of “economic imperialism” (Mäki, 2009), i.e.…”

Citation patterns in economics and beyond

“…This attitude is at least partly due to the origin-story of modern economics, which is influenced by the archetype of the natural sciencesa fact that had repercussions on both the historical positioning of the discipline (Samuelson 1972) as well as the evolution of its prevailing practices (Mirowski 1989). Other aspects of the peculiarities of economics include differences in research style and method (owing to a focus on mathematical and statistical methods [Morgan 1988]); a stronger degree of internal stratification (Fourcade et al 2015;Hodgson & Rothman 1999); its prominent role in the context of political decision-making (Beker 2010, Hall 1989; or its focus on a single, major theoretical approach as summarized in highly standardized textbooks (Graupe 2016;Skousen 1997).…”