I think Posner nails it on this one. Not to completely excuse Wall
Street the way he sometimes does, but there's a much larger systemic
problem which gets virtually no attention. And alas, has very few
viable solutions available...
http://correspondents.theatlantic.com/richard_posner/2009/07/economists_take_it_on_the_chin.php
Three articles in the July 16 issue of The Economist magazine
criticize the economics profession for its failure to anticipate the
financial crisis of last September, and the ensuing economic crisis,
and for its inability to agree on what should be done to speed
recovery. These articles, which can be found at
http://www.economist.com/opinion/displayStory.cfm?story_id=14031376&source=hptextfeature
http://www.economist.com/displaystory.cfm?story_id=14030288, and
http://www.economist.com/displaystory.cfm?story_id=14030296,
are well worth reading.
... The Obama Administration, with its ambitious public programs, does
not want to accuse government of incompetence, and the economists who
manage and advise the government's economic policies, many of whom
were complicit in the failures of anticipation and response, do not
wish to acknowledge their errors and those of their fellow economists.
Furthermore, Congress and the public, and much of the media, do not
understand macroeconomics or financial economics, and so they are
drawn to a populist theory in which the economic crisis is attributed
to the avarice and folly of financiers and the vulnerability of
gullible consumers. The populist theory suits the Administration and
the economics profession just fine, as it directs attention away from
government failure and the failure of professional economists inside
and outside the government.
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