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How Economists got it So Wrong

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By DCFalcon
September 8, 2009

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It is interesting; I spent the 2007-08 year as a first year student in a PhD Finance program at a Top University. All the classes I took were in the econ department for the first year; I was basically a first-year econ student.

The financial crisis was unfolding while I was there; one might expect that it would be a very interesting time to be in the graduate econ classroom. I can briefly summarize for you how the financial crisis was discussed, both inside and outside the class room: .

Nothing at all. The most significant economic and financial event in decades was happening out in the Real World, but it didn't penetrate the bubble of Academia. Rational expectations and normal distributions were still taught as gospel truth, and woe upon the student (me) who questioned the orthodoxy.

I still remember a professor advising me that critical thinking is a detriment to learning economics.

I still remember a professor scolding me that it would be inappropriate to teach anything realistic in his classroom.

I still remember my advisor yelling at me "Have an open mind! Stop questioning things!" after I questioned the relevance of theory in the face of recent events.

I am no longer a PhD student, largely because I couldn't accept the fact that academic economists I met have no interest in understanding how an actual economy actually works; they just enjoy irrelevant and overly-complicated math models.

- Jeff V