Identifying economic crises: insights from history

Xavier De Scheemaekere, Kim Oosterlinck and Ariane Szafarz

Financial History Review, 2015, vol. 22, issue 1, 1-18

Abstract: Economists have been blamed for their inability to forecast and address crises. This article attributes this inability to intertwined factors: the lack of a coherent definition of crises, the reference-class problem, the lack of imagination regarding the nature of future crises and sample-selection biases. Specifically, economists tend to adapt their views on crises to recent episodes, and omit averted and potential crises. Threshold-based definitions of crises run the risk of being ad hoc. Using historical examples, this article highlights some epistemological shortcomings of the current approach.

Date: 2015
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