Truth or precision? Some reflections on the economists’ failure to predict the financial crisis

Nicola Giocoli

The Review of Austrian Economics, 2016, vol. 29, issue 4, No 3, 386 pages

Abstract: Abstract The failure of professional economic forecasters to predict the financial crises has led many to question the credibility of modern economics as a reliable foundation for economic policy. If economists were unable to foresee so big a crisis, how can they be trusted to cure or prevent it? Several accounts of this failure exist. The paper offers a tentative answer based on the lessons that may be drawn from the wisdom of a short list of past and present economists: Hayek, Neville Keynes, Mankiw, Tinbergen, Maynard Keynes and Lucas. The glue to keep such an odd bunch together is the distinction between truth and precision provided by science historian Ted Porter.

Keywords: Macroeconomic forecasts; Hayek; Pattern predictions; Financial crisis; DSGE models (search for similar items in EconPapers)
JEL-codes: B22 B25 B41 E37 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s11138-015-0335-7

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