The Queen and Economists

28th July, 2009

Fascinating editorial in today’s Financial Times about a visit that the Queen paid to the London School of Economics recently, the editorial is available HERE and the letter at the bottom of this entry. In her visit she asked all of the economists why nobody in the economics profession had seen the current crisis coming. Not everybody is at fault here it has to be said. A few international economists such as Robert Shiller predicted the collapse of the housing bubble, Gillian Tett of the FT was one of the few journalists who spotted that this could have aweful consequences on the entire banking system.

However I imagine that when such a question is put by the monarch of your country it does provoke some soul searching. There isn’t half enough of this happening in Ireland at the moment.

The economics profession is now beginning to respond back to the Queen. This Sunday the British Academy send a wonderfully elegant response back to Buckingham Palace. It’s attached here.

It makes for great reading. It makes the point that the economic consensus has been to deal with the collapse of economic bubbles rather than stop them happening in the first place. It summarises with ‘So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.’

Maybe the President will ask similar questions of our own lot?