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Noah Smith

Wonks Abandon an Economic Dream

Economics has a long way to go before it can predict busts.
Things get murky after this.

Things get murky after this.

Photographer: Peter Macdiarmid/Getty Images

There has been an interesting debate in economics blog-land during the past couple of weeks. Basically, a lot of people outside econ academia are very annoyed with macroeconomics for failing to foresee the possibility of a big crisis, right up until a big one hit in 2008. A lot of these people blame the type of models that academic macroeconomists were using at the time (and are mostly still using now).

The question here is whether economists should focus most of their energy on what happens in normal times, or focus on what happens when things go crazy.