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The Financial Crisis And The Systemic Failure Of Academic Economics

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Executive Summary

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In the authors' view, this lack of understanding is due to a misallocation of research efforts in economics. They trace the deeper roots of this failure to the profession's insistence on constructing models that, by design, disregard the key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public.

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