The Financial Crisis and the Systemic Failure of Academic Economics

18 Pages Posted: 11 Mar 2009

See all articles by David Colander

David Colander

Middlebury College - Department of Economics

Hans Föllmer

Humboldt University of Berlin

Armin Haas

Institute for Advanced Sustainability Studies

Michael D. Goldberg

University of New Hampshire

Katarina Juselius

University of Copenhagen - Department of Economics

Alan Kirman

GREQAM

Thomas Lux

University of Kiel - Institute of Economics; University of Bonn - Economic Science Area

Birgitte Sloth

University of Copenhagen

Date Written: March 9, 2009

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

Suggested Citation

Colander, David and Follmer, Hans and Haas, Armin and Goldberg, Michael D. and Juselius, Katarina and Kirman, Alan and Lux, Thomas and Sloth, Birgitte, The Financial Crisis and the Systemic Failure of Academic Economics (March 9, 2009). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 09-03, Available at SSRN: https://ssrn.com/abstract=1355882 or http://dx.doi.org/10.2139/ssrn.1355882

David Colander

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
802-443-5302 (Phone)

Hans Follmer

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, D-10099
Germany
49 30 2093 5817 (Phone)
49 30 2093 5848 (Fax)

Armin Haas

Institute for Advanced Sustainability Studies ( email )

Berlinerstrasse 130
Potsdam
Germany

Michael D. Goldberg

University of New Hampshire ( email )

Durham, NH 03824
United States
603-862-3385 (Phone)
603-862-3383 (Fax)

HOME PAGE: http://pubpages.unh.edu/~michaelg/

Katarina Juselius

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Alan Kirman

GREQAM ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France
+3391140770 (Phone)
+3391900227 (Fax)

Thomas Lux (Contact Author)

University of Kiel - Institute of Economics ( email )

Olshausenstr. 40
D-24118 Kiel, 24098
Germany

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49-228-73-9519 (Phone)
+49-228-73-7953 (Fax)

Birgitte Sloth

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

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