18 Pages Posted: 11 Mar 2009
Date Written: March 9, 2009
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: Suggested Citation
Colander, David and Föllmer, 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
By Dan Awrey