A timely piece, but may still leave far more questions than answers…
What Are Economists Getting Wrong Today?
A decade after the financial crisis that nobody saw coming, we ask economists what they might, currently, be missing.
Bloomberg, August 1, 2018
At the height of the financial crisis in late 2008, Queen Elizabeth II asked an economist, “Why did nobody notice it?”
Aside from a handful of dismal scientists branded as doomsters before the turmoil hit, the failure was a collective one for economists from Wall Street to academia.
Indeed, a 2014 study by Prakash Loungani of the International Monetary Fund found that not one of the 49 recessions suffered around the world in 2009 had been predicted by a consensus of economists a year earlier. Further back, he discovered only two of the 60 recessions of the 1990s were anticipated a year in advance.
A decade on from the British monarch’s question seems an opportune time to ask what economists might be missing.
What are economists getting wrong today?
“Given our past record in predicting the economic impact of technology, economists will probably get this wrong again. Today, weak productivity growth seems puzzling at a time of great new technological innovations. But in the past, it took decades for electricity or cars or computers to be fully integrated into our production processes and business practices and to boost productivity growth. Likewise, the internet of things or artificial intelligence will take time to be similarly integrated and to be visible in our measures of productivity. While being well aware that, in the 1930s, [John Maynard] Keynes famously predicted that automation would lead to a three-hour working day, my sense is that this process is likely to speed up and surprise on the positive side.” —Peter Praet, Chief Economist at the European Central Bank. Read More