Economics: Is the discipline in crisis?

Drake Bennett of the Boston Globe is reporting on the soul searching that is going on the field of economics and finance after the professions inability to foresee the crisis. 

THE DEEPENING ECONOMIC downturn has been hard on a lot of people, but it has been hard in a particular way for economists. For most of us, pain and apprehension have been mixed with a sense of grim amazement at the complexity of what has unfolded: the dense, invisible lattice connecting house prices to insurance companies to job losses to car sales, the inscrutability of the financial instruments that helped to spread the poison, the sense that the ratings agencies and regulatory bodies were overmatched by events, the wild gyrations of the stock market in the past few months. It’s hard enough to understand what’s happening, and it seems absurd to think we could have seen it coming beforehand. The vast majority of us, after all, are not experts. But academic economists are. And with very few exceptions, they did not predict the crisis, either. Some warned of a housing bubble, but almost none foresaw the resulting cataclysm. An entire field of experts dedicated to studying the behavior of markets failed to anticipate what may prove to be the biggest economic collapse of our lifetime. And, now that we’re in the middle of it, many frankly admit that they’re not sure how to prevent things from getting worse.

Read Full Story “Paradigm lost: Economists missed the brewing crisis. Now many are asking: How can we do better” on Boston.com

Paulson on the diversity of firm in the financial industry

Trying to imitate high-status Newtonian physics, management scholars over the past fifty hear have tried to formulate general laws about the behavior of organizations.  In his statement after the passing of the $700 billion bailout of the financial industry, Paulson in my view correctly emphasized that the salient fact about most industries is the diversity and not the sameness of firms within them. 

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Review of Jared Diamond’s New Book “Collapse”

The author of Guns, Germs, and Steel considers why some societies collapse when faced with environmental or political catastrophe, while others soldier on. Malcom Galdwell has published a useful review of the book in the New Yorker .

Evolutionary Economics—The State of the Science

This is a talk I gave at a conference New Perspectives on Telecommunications and Pharmaceuticals in Europe and the United States: Conference on Evolutionary Economics:
Conference Program

Good morning. Let me give you a quick road map of my presentation. First, I will discuss where we are in terms of evolutionary economics, beginning with Nelson and Winter, 1982, the key book in this literature. Then I’ll provide a quick review of the ideas behind evolutionary accounts, laying out the requirements for a valid evolutionary explanation. I’ll follow this with a discussion of recent trends in the literature over the last six or seven years, addressing what I believe to be some of the key outstanding issues that should be addressed by the evolutionary perspective. Finally, time-permitting I’ll speculate a little bit about how one can make economics more an evolutionary science, and about what can be done to make evolutionary ideas more accepted.

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