I wrote this for leisure over the weekend and it does not really have a business implication, except perhaps very indirectly. So it goes straight to the blog, without bothering clients over. Perhaps I will reference it in a note, as an aside.
The macro wars over who is at fault for The Global Financial Crisis have heated up again. Some want to blame something called “economics” and some want to defend it. The point I raise here is that both sides are probably flattering “economics”, overstating its importance on occasions such as The Crisis.
This is not to say that economics has no role. Learning the lessons from the The Crisis is important. But the folks who saw 08 coming did not do so on the basis of superior economics. Rather, to generalize, they tended to be in the right seats and to have the right personal qualities. And the more widespread failures were not mostly of “economics.” Excessive confidence in a conventional macro emphasizing market discipline probably contributed, but it was not the main source of failure.