By Institute economists Elira Karaja and Elham Saeidinezhad
Friedrich von Hayek described the economist’s task as demonstrating how little we really know about what we imagine we can design.
The fifth anniversary of the start of the most severe financial crisis since the Great Depression has us reflecting on how little we were able to predict from macroeconomic models – the very models we use to capture business cycle dynamics. While being careful not to completely overturn the mainstream body of economics, the very fact that they could not predict the most important economic phenomenon in nearly a century requires us to question the way these models perform. Read more