In his lecture at the Latsis Symposium 2012 “Economics on the Move” in Zurich, Nobel Laureate Joe Stiglitz nails the fundamental problem and crisis of modern macroeconomics, which failed to predict the financial crisis.
If you say…what is good science is prediction… and you can’t predict the most important event in 75 years, what good are you? In particular, it might be very nice you can talk about the likelihood of an one tenth increase in GDP growth rate…and you miss a major economic downturn….or worse, they said the things can’t happen…
Here are the money quotes,
We all know the shock in this crisis…was a credit bubble and we have had those credit bubbles since the beginning of capitalism…So it was remarkable the intellectual bubble led people to believe there were no such thing as credit bubbles when there was 200 years of history of that…..How could people be so stupid?
…The theory was with well functioning financial markets, spreading risk, diversifying risk, risk is contained. They came to believe the models and that’s always dangerous..
Say it ain’t so, Joe. Say it ain’t so!
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Global Macro Monitor 
Reblogged this on This Got My Attention and commented:
Is Stiglitz turning Austrian? Uhhhh, unlikely. But, he seems to have seen a bit of light.
Wow. This is what happens when the self-appointed intellectual elites try to run the market.
Everybody got floored by greed.Plain and simple.How on earth could banks give home loans to jobless folks, simply amazes me. An actuarial guy was able to solve a mathematical equation and common sense ( which my late father constantly reminded is not commonly found ) was totally disregarded has got everybody now living in fear.
Asian countries will never deregulate the financial sector.Simply because they know how venomous the goddess of wealth can be.
Let us stop hiding behind intellectual theories.a huge problem has been created for everybody on Earth.The need of the hour is for everybody to put their heads down and ponder how to overcome the margin problems, how to sort out the speculators,etc.
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