Some of the nation’s brightest economists failed to predict the foreclosure crisis and economic recession that followed.
In this video, Economics Correspondent Paul Solman attends a conference of 10,000 economists and asks them why so few connected the dots in time to warn the public.
This report is the beginning of a year-long financial literacy project, which will include lesson plans and other resources for teachers, funded by the Sloan Foundation.
Quotes
“The idea is, because of the population growth, which will go on forever (is the assumption), the economy is growing, because China and India are showing the way that capitalism is exploding, and that seems like, well, maybe that is a reason that prices are just going to go up, up and up.” – Robert Shiller, economist Yale University
“Things can go wrong. But the number of things that have gone wrong and the ferocity with which they have gone wrong, I think, was beyond the imagination of almost everyone.” – Alan Blinder, economist Princeton University
“It turns out that neuroscientists have shown that financial gain triggers the exact same reward circuitry in the brain that cocaine does. So when you’re making money, you’re actually engaged in a kind of activity that generates a drug-induced stupor in much the same way that having a few drinks or being on cocaine would actually make you relax and be a lot less concerned about risk.” – Andrew Lo, economist Massachusetts Institute of Technology
Warm Up Questions
1. What does an economist do?
2. Do you think people who study the economy should have warned us all about the economic recession?
Discussion Questions
1. Several reasons were given for not warning about the recession: population growth suggested that economic growth could continue; it was impossible to predict; no one would listen; banks kept the risky investments a secret; people want to believe that there are limits and regulations. Which reason do you believe is true, or do you have your own?
2. Would you want to be an economist? Why or why not?
3. What role do economists play in journalism and education? How might they be useful in this time of economic trouble?
Additional Resources