Wednesday, August 18, 2010

Why Didn’t Anyone Predict the Great Recession: Are Economists Dummies?

These are big (but not huge) name economists. Writing a paper as part of the NBER series confirms their elite status. Here’s what they did:

We …  search for simple quantitative models of macroeconomic and financial indicators of the “Great Recession” of 2008-09.

They were thorough:

We use a cross-country approach and examine a number of potential causes that have been found to be successful indicators of crisis intensity by other scholars. We check a number of different indicators of crisis intensity, and a variety of different country samples.

Here’s what they found:

… We find few clear reliable indicators in the pre-crisis data of the incidence of the Great Recession.

If it was easy figuring these things out, we wouldn’t need a college major to learn about it.

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