The Financial Crisis and the Systemic Failure of Academic Economics

David Colander (), Hans Föllmer, Armin Haas, Michael Goldberg Goldberg, Katarina Juselius, Alan Kirman (), Thomas Lux and Birgitte Sloth ()
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Hans Föllmer: Department of Mathematics, Humboldt University Berlin
Armin Haas: Potsdam Institute for Climate Impact Research
Michael Goldberg Goldberg: Whittemore School of Business & Economics, University of New Hampshire
Thomas Lux: Department of Economics, University of Kiel

No 09-03, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s focus on models that, by design, disregard key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.

Keywords: financial crisis; academic moral hazard; ethic responsibility of researchers (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-pke and nep-sog
Date: 2009-03
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Working Paper: The Financial Crisis and the Systemic Failure of Academic Economics (2009)
Working Paper: The Financial Crisis and the Systemic Failure of Academic Economics (2009)
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