07 Aug 2009

Scratch Brad DeLong Off the List

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This is all I’m looking for, no big requirements on my end. Brad DeLong quotes Robert Lucas who argued that nobody saw this train wreck coming, and then comments:

some economists did indeed forecast the financial crisis of 2008–or, rather, forecast that Alan Greenspan’s low interest rate policies of 2002-2004 (policies I approved of and endorsed, by the way) ran an unacceptable risk of getting the economy wedged into a position like the one it now is. All praise and honor to Dean Baker, Richard Thaler, Robert Shiller, Michael Mussa, and their posse. Here’s Michael Mussa, writing in 2004…

Then after quoting from Mussa who nailed it, DeLong continues:

The disappointment with economists is not because there were none of us who forecast the possibility of the crisis we are in, but rather that economists like Robert Lucas and myself did not listen with sufficient care and attention to [the] Michael Mussa posse. (Indeed, I have a half-finished paper that will now never, ever be finished on how Mussa was wrong.)

OK so DeLong admitted he got it wrong, and that the people warning about Greenspan’s low interest rates were correct. That’s all I hope for from critics of Austrian economics. Obviously we’re not going to make everyone a Misesian overnight, but as long as we admit when “our side” loses on a particular point, then it’s worthwhile to continue debating.

(This is incidentally why I’m putting so much effort in cultivating good relations with the monetary crank Scott Sumner. When he sees the CPI over the next 12 months, I think he will have some serious ‘splainin to do on his blog, and I think he will do it honestly.)

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