Global Financial Collapse: The Guilty Economists who destroyed the world and the Economics itself
- Kamran Mofid
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My views on what has gone wrong with the so-called modern economics and the economists who have brought shame to their profession are well documented.
For example see:
I am now pleased that the real-world economics review has identified the top ten mad ones, including two in two-pairs. They have brought us indeed a very bad harvest and have destroyed economics as a wise subject for years to come.
Please see below for more and try to vote to see who the guiltiest of them is! This is very important, as the real-world economics review has noted:
"It is accepted fact that the economics profession through its teachings, pronouncements and policy recommendations facilitated the GFC (Global Financial Collapse). We also know that danger signs became visible long before the event and that some economists (those with their eyes on the real-world) gave public warnings which if acted upon would have averted the human disaster.
With other learned professions entrusted with public confidence, such as medicine and engineering, it is inconceivable that their professional bodies would not at the very least censure members who had successfully persuaded governments and public opinion to ignore elementary safety measures, so causing epidemics and widespread building collapses.
To date, however, the world’s major economics associations have declined to censure the major facilitators of the GFC or even to publicly identify them. This silence, this indifference to causing human suffering, constitutes grave moral failure. It also gives license to economists to continue to indulge in axiom-happy behaviour. Nor has the economics establishment offered recognition to those economists who were not taken in by fads and fashion and whose competence, if listened to, would have prevented the collapse.
These two silences reveal a continuing moral crisis within the economics profession. The Ignoble and Noble Prizes for Economics are being offered as small first steps towards a cure. Voting is now open for the Ignoble Prize for Economics The Ignoble Prize for Economics is to be awarded to the three economists who contributed most to enabling the Global Financial Collapse (GFC)
Voting is ultra quick and easy. Click here and you will see the ballot. Click on your three choices and then the big yellow “vote” button.
22 economists were nominated for the prize. Through consultation with contributors to the Real-World Economics Review Blog, the following short list of ten, including two pairs of economists, has been selected for the ballot.
Dossiers of short-listed of nominees for the Ignoble Prize for Economics
Fischer Black and Myron Scholes
They jointly developed the Black-Scholes model which led to the explosive growth of financial derivatives. The importance given to their hypothetical calculation of derivative prices was baneful not just because it was bogus, but also because it meant that relevant and often urgent real-world economic research was widely neglected by the profession. Eugene Fama His “efficient market theory” provided the moral umbrella for all sorts of greed, predatory behaviour and incompetent corporate management. It also provided the rationale for deregulation. And his theory’s widespread acceptance meant that “discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse.” In these three ways Fama’s work created the environment which made possible the GFC.
He propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modeled using counterfactual propositions about its nature. This, together with his simplistic model of money, encouraged the development of the financial theories with unrealistic assumptions that facilitated the GFC. In short, he opened the door for everyone subsequently to theorize without fear of having to be attached to reality.
As Chairman of the Federal Reserve System from 1987 to 2006, he both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation. Before a Congressional committee on 28 October 2008 Greenspan confessed that his theoretical beliefs of 40 years were now proven to be without foundation, hence his total confusion and failure at his job.
By working to make the Riksbank Prize in Economic Sciences (“Nobel Prize in Economics”) almost exclusively a prize for neoclassical economists, this Swedish economist has contributed significantly to the conversion of the economics profession and of world public opinion to market fundamentalism.
His development of the rational expectations hypothesis, which defined rationality as the capacity to accurately predict the future, both served to maintain Friedman's proposition that monetary factors do not affect the real economy and, in the name of “rigor”, distanced economics even further from reality than Friedman had thought possible.
As Secretary-General of the Royal Economic Society from 1992-2008, he helped suppress worries expressed by non-mainstream economists about developments in the financial sector. In 2007 he wrote a Report for the Icelandic Chamber of Commerce giving a clean bill of health to Icelandic banks only a few months before they collapsed. When investigators called attention to the real state of Icelandic banking, he wrote a series of letters to the Financial Times defending the soundness of Icelandic banks and imputing professional incompetence to those who doubted it.
Edward Prescott and Finn Kydland
For jointly developing and popularizing “Real Business Cycle” theory, which by omitting the role of credit greatly diminished the economics profession’s understanding of dynamic macroeconomic processes.
Through his textbook Economics: An Introductory Analysis (19 English language editions and translated into 40 languages), he popularized neoclassical economics, contributing more than any other economist to its diffusion and thereby to the deregulation of financial markets which made possible the GFC.
As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), he worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking. He also worked with Greenspan and Wall Street interests to torpedo efforts to regulate derivatives.