Sometimes the best news isn't on the front page. Yesterday it was in the New York Times arts section. The article was entitled Ivory Tower Unswayed By Crashing Economy. While the article was about academic economists, it is also applicable to most disciplines, that exploring new ideas or theories is nearly impossible in an academic setting because of the intransigence of "elder" academic advisors. But that is another piece of writing for another day.
What is clear is that both the mathematical modeling and the reliance on traditional economic theory, that is, people make rational economic decisions and the market automatically adjusts to respond to those decisions, is the prevailing overarching belief system of economists.
As a friend dryly said a few days ago, "corporations are not people." Despite judicial precedent that allows corporations to have the same "rights" as individuals in this country, indeed, a corporation is not an human. Rather it is a composition of many many people, making many many decisions, most of them based on their own self interest rather than the interests of shareholders, other employees, or even the so-called health of the company.
Behavioral economists, a "new" branch of economic theory, much disdained by the Free Market theorists, believe that economists must also evaluate decisions by using theories from psychology. I would add anthropology and sociology. Hopefully, these new behavioral economists become prevalent and the reliance on both Free Marketeers and mathematical modeling (which tends to make assumptions based on free market theory) diminishes.
It will, I think, be interesting in time to read what these academicians begin to dissect as the causes of this current economic debacle. There is plenty of places and people who made so-called rational decisions. But clearly they were not in the best interests of anyone other than their pocket books. But the irony is there are no such thing as free markets, and those who lined their own wallets did so with assists from tax breaks and now with bail outs. Hopefully, economists begin to think about that, too.
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