The economics profession and the current crisis

1. Tyler Cowen answers a reader's question: "What will be the impacts of the current situation for economics and economists. It seems clear that we have screwed up. We don't even have the excuse that we understood what was going on but no one listened to us...."

2. Greg Mankiw points to an interview with Galbraith the Younger (who said in the interview "It’s [failure to predict the crisis is] an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless." Mankiw goes on to observe "If [an Obama administration] is filled with prominent members of both [mainstream and heterodox economists], the internal battles over the heart and soul of the new administration's economic policy should prove fascinating to watch."

Perhaps the question that should be asked is will the crisis fuel an increase in the demand for heterodox economists? My kneejerk answer is no. From what I have seen, in the immediate wake of the crisis is a turning towards mainstream economists. There is not so much a desire to understanding why the crisis in all its details was not foreseen, but a desire to understand what happened, what emergency action makes the most sense, and how the economy will respond going forward.

That said, the crisis will be very fertile ground for economic research.

I also sense that the demand for amusing microeconomic puzzles (to which I am drawn) will wane. Thus demand for freakonomics and other variants will slow if not fall during an economic slowdown much like the demand for fashion apparel.

Addendum. Arnold Kling: Future Scenarios for Economics