In response to an FT Blog by Gavin Davies on 31st May 2015, entitled 'Has the thinking of macroeconomic policy been successful?'
"Unorthodox economists are another set entirely, and were largely unrepresented at the IMF conference, which does not imply that they are insignificant"
The 'unorthodox' economists were mainly the people who warned of the 2008 financial crash. The economists at the IMF conference, were the folks who ignored them.
In 2009, in a paper entitled 'No-one saw this coming', Dirk Bezemer of the University of Groningen, identified 12 individuals including academics, government advisers, consultants, investors, stock market commentators and one graduate student, who between 2000 and 2006 had warned specifically about a housing led financial crash. In alphabetic order these people were:
Dean Baker, Wynne Godley, Fred Harrison (UK), Michael Hudson, Eric Janszen, Steve Keen (Australia) Jakob Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer, Nouriel Roubini, Peter Schiff, Robert Shiller.
In 2010, Real World Economics Review ran a reader poll to identify the three economists who "first and most clearly anticipated and gave public warning of the Global Financial Collapse and whose work is most likely to prevent another GFC in the future". The eventual winner of this was Professor Steve Keen, who is now Professor of Economics at Kingston.
By contrast, the panelists at the IMF conference were (in order of appearance):
Viral Acharya, Anat Admati, Philipp Hildebrand, Robert Rubin, Hyun Dong Shin, Paul Tucker, Ben Bernanke, Gill Marcus, John Taylor, Marco Buti, Martin Feldtein, Brad DeLong, Agustin Obstfeld, Luiz A. Pereira da Silva, Ricardo Caballero, Jaime Caruna, Zeti Akhtar Aziz, and then for the finale: Olivier Blanchard, Raghuram Rajan, Kenneth Rogoff, Lawrence Summers.
Leaving aside any judgement on the merits of these panelists, what explains the total absence of anyone on the first list? Apart from Mr Godley, now sadly deceased, I believe that these folks are still around. Steve Keen most certainly is, and he is warning that the problems that caused the 2008 crash are now worse.
What explains his absence and the absence of the 'unorthodox'? Here's my take -
1. 'Ignorance'...of how the real economy of people, ideas, and capital flows actually work
2. 'Hubris'...because a PhD and a spot at the big boys table is supposed to prove otherwise, and
3. 'Fear'...fear that the models that you have built a 30 year career upon are wrong
Dr Bernanke could not spot a bubble if one landed on his head singing a tune. His comments last week are a good contrarian indicator for anyone getting 'twitchy' about the S&P500 - he proclaimed there are "no large mis-pricings in US Securities, asset prices". Anyone who remembers his comments on the housing market in early 2007 may want to sell now. Professor Summers was one of the primary architects of the conditions that lead to 2008 through his facilitation of the massive scam of packaging and repackaging garbage, made possible by the repeal of Glass-Steagal.
And yet Messrs Bernanke and Summers are the ones who the IMF invite to 'rethinking macro' - God help us.
If there are any under-graduate economists reading this - please don’t take ‘equilibrium’ and all its spin-offs as gospel. Read Smith, read Schumpeter, read Mises, look at complexity models, investigate cycles, go listen to Professor Steve Keen critique the mainstream…and when you graduate get a job making a product or service that customers want to buy from you because it contributes something to their lives. Make a success of that for the 8/9 years it will take you to experience the business cycle, and then come back to economics. You will have more understanding of the real economy than most of your teachers ever did, certainly more than Dr Bernanke or Professor Summers.