Thursday, November 22, 2018

The End of (Modern Finance) Theory...

During a visit to the London School of Economics as the 2008 financial crisis was reaching its climax, Queen Elizabeth asked the question that no doubt was on the minds of many of her subjects: "Why did nobody see it coming?" The response, at least by the university of Chicago economist Robert Lucas, was blunt: Economics could not give useful service for the 2008 crisis because economic theory has established that it cannot predict such crisis. As John Kay writes, "Faced with such a response, a wise sovereign will seek counsel elsewhere." And so might we all.*

*Hat Tip ~ Richard Bookstaber, The End of Theory

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