Today's Times has an interesting mea culpa here.
This is the key quote:
Business schools have shown a remarkable ability to miss the economic catastrophes unfolding before their eyes.
Of course they do: they're not economists.
The real problem is that economists have also shown a remarkable ability to miss the same economic catastrophes. Especially the forecasters.
Now, those who know me also know that I do forecasting: am I saying that I missed it as well?
We all did.
Even those who were convinced a downturn was coming missed it.
The article linked to ut supra also points out the fundamental problem: that most in the profession follow what others in the profession do. And think. And forecast.
Amongst forecasters, there is a convenient benchmark called the Consensus. I've worked with the consensus extensively, and think that orienting forecasts towards the consensus is one of the things that helped lead to this problem: using the consensus as a benchmark means that the forecaster has ceased to critically think about why his forecast looks the way it does. Group-think is also a problem within the forecasting community, and what the author says about MBAs is applicable here as well:
"They can't really step back and take a critical view," he said. "They're totally defined by others and by the outcomes of what they're doing."
The non-academic economics profession is facing an uphill struggle after losing two significant battles: first, the economists have been replaced by the accountants and the lawyers; second, the mathematization of the academic economist has also had its impact on the lowly business economist.
The only problem is that the failure, the abject failure of the MBAs and the lawyers in the current crisis doesn't mean that the business economist will suddenly return to vogue, especially given the power that the accountants and lawyers wield in the companies. Rather, if anything, things will have to become significantly worse before anyone is willing, once again, to listen to economists. It's our task to make that what we say also something worth listening to.
While the ignorance of the lawyers and the accountants to la via economique didn't create the problems we are facing, it helped make them inevitable.