Via Econospeak (which is quickly becoming one of my favorite blogs), Thomas Palley has written a response to the Queen of England’s request for an explanation on why no one predicted the crisis. He was actually responding to a different response letter written by Tim Besley and Peter Hennessy, in which they argued that the failure was one of “collective imagination.” Palley writes,
The failure was due to the sociology of the economics profession. This failure was a long time in the making and was the product of the profession becoming increasingly arrogant, narrow, and closed minded. One was compelled to adhere to the dominant ideological construction of economics or face exclusion. That was the mindset of the IMF and the World Bank with their “Washington Consensus”, and it was the mindset of central bankers (including your own Bank of England) with their thinking about the sufficiency of inflation targeting and hostility to regulation…
Professors Besley and Hennessy’s letter is another example of the economics profession’s complete inability to come to grips with its sociological failure which produced massive intellectual failure with huge costs for society. This is a very serious social problem and we will all continue to pay the costs as long as it is unaddressed.
I inadequately blogged about Palley’s succinct and thorough examination of the crisis a few months back. He continues to be nearly spot-on.