Washington Post labor columnist Harold Meyerson, who is to economics what Roman Polanski is to the age of consent, nonetheless tries to condemn that which he does not begin to comprehend, let alone consider legitimate:
The problem with contemporary economics, at least with the purer strain of free-market economics associated with the University of Chicago, is not simply that it failed to predict the near-collapse of the world financial system last year. The problem is that it believed such a collapse could not happen, that all risk could be quantified by mathematical models and that these quantifications could help us correctly price just about everything. Out of this belief arose the banks' practice of securitization, which put a value on all manner of mortgages and enabled buyers to purchase and swap them with the certainty that such transactions reflected an accurate judgment of the value of the propertiess and the risks associated with them.
Except, they didn't. So long as economists insisted that they did, however, there really was no need to study such things as bubbles, which only a handful of skeptics and hopelessly retro Keynesians even considered possible. Under mainstream economic theory, which held that everything was correctly priced, bubbles simply couldn't exist.
The one economist who has emerged from the current troubles with his reputation not only intact but enhanced is, of course, Keynes.
Where to begin? Start with Reason econ columnist and Contributing Editor Veronique de Rugy, writing over at The Corner:
[H]as Mr. Meyerson ever heard of the Austrian school of economics? Over the years, this school has produced many serious free-market economics who wrote extensively on the problem of using math to mimic the real world. […]
Mr. Meyerson should read the Austrian Economists blog. Great economists such as Pete Boettke, Frederic Sautet, and Steven Horwitz make the case for freedom daily, with no math. He should also read their books and articles; all published in respected academics journals, without much math at all.
And by the way, all of these economists have claimed for years that we were heading for disaster.
Yeah, I didn't realize Peter Schiff was a Keynesian….To read more living refutation of Meyerson's embarrassing inaccuracies, start with this June 2008 Reason panel of free-market economic doomsayers.
