Issue: The crisis of 2007-08 demonstrated that macroeconomics and macroeconomists failed as a social science and a profession.
The objectives of macroeconomics as a social science are twofold: to understand the complex workings and drivers of the global economy through models and predict the economic changes in the near future. Successfully macroeconomists not only grasp the intricate webs of our economy but also are able to advise on policies that would ensure economic stability and prosperity.
The crisis of 2007-08 proved that the macroeconomics framework of regular yet self-correcting economic fluctuations was inadequate to explain the complications of the economy. Since the 1980s and up until the recent crisis, real GDP growth in the …show more content…
Edward Lazear, an economist at Stanford, wrote an article in 2000 titled “Economic Imperialism” and attributed it to his field’s rigor. “Economics is scientific; it follows the scientific method of stating a formal refutable theory, testing the theory, and revising the theory based on the evidence,” he wrote. Such is the nature of macroeconomics. Unlike physics or chemistry, there are no absolute laws that govern the way things work in macroeconomics. It’s a social science that continues to evolve every single day with newly discovered evidence by macroeconomists. Whether it is the Great Depression, the Dot-Com bubble burst or the most recent 2008 credit crisis – they have all greatly contributed to the evolution of macroeconomic theories. Macroeconomists will never be 100% confident in their analysis but crises and other events are essential to improving the social science as well as policies that regulate our …show more content…
Although the role of speculative bubbles and its linkage to the economy was essential to half of the crises historically, each bubble is independent to each other and only occurs once. When the bubble bursts, it leaves a dent on the economy but does not cause the next crisis. However, there is one key characteristic that all past 11 crises had in common – backward looking policy fixes. Every time there is a crisis, policymakers are quick to implement reform. However, these reforms are based on the lessons learned from the previous crisis and will only prevent the same one from occurring again. History has revealed that the nature of every single crisis is vastly different from one another, whether it is the 1990 Savings and Loans crisis, the 1998 Long Term Capital Management crisis, the 2000 Dotcom crisis or the 2008 subprime crisis. One crisis leads to another because after implementing the policy reforms following one crisis, economists and policymakers become complacent with their “backward looking fix” and do not anticipate the next disaster to
The objectives of macroeconomics as a social science are twofold: to understand the complex workings and drivers of the global economy through models and predict the economic changes in the near future. Successfully macroeconomists not only grasp the intricate webs of our economy but also are able to advise on policies that would ensure economic stability and prosperity.
The crisis of 2007-08 proved that the macroeconomics framework of regular yet self-correcting economic fluctuations was inadequate to explain the complications of the economy. Since the 1980s and up until the recent crisis, real GDP growth in the …show more content…
Edward Lazear, an economist at Stanford, wrote an article in 2000 titled “Economic Imperialism” and attributed it to his field’s rigor. “Economics is scientific; it follows the scientific method of stating a formal refutable theory, testing the theory, and revising the theory based on the evidence,” he wrote. Such is the nature of macroeconomics. Unlike physics or chemistry, there are no absolute laws that govern the way things work in macroeconomics. It’s a social science that continues to evolve every single day with newly discovered evidence by macroeconomists. Whether it is the Great Depression, the Dot-Com bubble burst or the most recent 2008 credit crisis – they have all greatly contributed to the evolution of macroeconomic theories. Macroeconomists will never be 100% confident in their analysis but crises and other events are essential to improving the social science as well as policies that regulate our …show more content…
Although the role of speculative bubbles and its linkage to the economy was essential to half of the crises historically, each bubble is independent to each other and only occurs once. When the bubble bursts, it leaves a dent on the economy but does not cause the next crisis. However, there is one key characteristic that all past 11 crises had in common – backward looking policy fixes. Every time there is a crisis, policymakers are quick to implement reform. However, these reforms are based on the lessons learned from the previous crisis and will only prevent the same one from occurring again. History has revealed that the nature of every single crisis is vastly different from one another, whether it is the 1990 Savings and Loans crisis, the 1998 Long Term Capital Management crisis, the 2000 Dotcom crisis or the 2008 subprime crisis. One crisis leads to another because after implementing the policy reforms following one crisis, economists and policymakers become complacent with their “backward looking fix” and do not anticipate the next disaster to