In late September 2008 Congressman Peter Hoekstra stated on the PBS Newshour program:
'... the people back home ... are wondering how we got into this predicament in the first place. We have a Treasury Department. We have the Federal Reserve. Why didn't they anticipate it?'
The short answer to these very good questions is that ‘they’ had no means of anticipating the looming catastrophe; and that fatal defects in the entire rationale and structure of economic and financial policy formulation, monitoring and regulation etc caused the Great Recession.
This site aims to provide somewhat longer answers to those and related questions.
Some of the finest minds in postwar academic economics identified the principal ‘economics’ causes of the current Great Recession years ago. These contributions are highly relevant to current circumstances, but were subsequently totally ignored for reasons of ideology, influence, power and vested interests.
Additional (individually) fatal defects in macroeconomics, beyond those identified within economics, are very apparent from the management science ‘systems’ perspective. Those are discussed elsewhere on this site.
George Santayana is quoted as saying: ‘Those who forget history are doomed to repeat it’. Substituting the words ‘deliberately ignore’ for ‘forget’ gives both a stronger statement, and one that more-accurately describes recent events. The earlier contributions have been ignored for ideological and power reasons, just as anything outside or inconsistent with the prevailing macroeconomic orthodoxy is always excluded and ignored.
A situation, in which the bankrupt macroeconomic orthodoxy exercises monopoly control over policy, is the worst of all worlds. The entire economic and financial debate is conducted only in macro terms, whereas real solutions lie partly outside economics as a whole. Another discipline would have to be co-opted in order to provide essential ingredients that economics is not equipped to provide. Meanwhile, policy wanders interminably in a dispiriting wilderness of ineffectiveness and inefficiency. The only winners are academic, government and private-sector macroeconomists and their media fellow travellers.
The particular defect identified by Congressman Peter Hoekstra – absence of a predictive capacity in macroeconomics – is something that belongs to, and can be identified and rectified by the additional discipline. Economics (and certainly macroeconomics) is not equipped to provide that key attribute.
As described in this site’s first Issue, ‘The System Dynamics Society (SDS)’, that other discipline (a branch of management science) is institutionally very weak; having never been properly promoted and supported by the SDS. That discipline has also been excluded internationally from public policy and administration by the dominant macroeconomic orthodoxy. Nevertheless, the management science discipline is technically well able to meet economic and financial policy demands upon it, for purposes of resolving the real causes of the Great Recession. Indeed, no other alternative is available for these purposes.
Aided and abetted by compliant economic and financial journalists, by academic economists, and by professional economists outside government agencies, the economic and financial agencies that lead the macroeconomic orthodoxy internationally have been consistently successful in avoiding accountability for the depradations inflicted by macroeconomic management. There has long been no point of comparison from which to judge the effectiveness and efficiency of that management.
The orthodoxy has been remarkably successful in avoiding and suppressing discussion of the real causes of the Great Recession. Macroeconomic cadres are in all positions necessary to ensure that debate proceeds only on macro’s terms. The bases are covered!
External to the main macroeconomic policy agencies these positions include staffs of Congressional and Parliamentary committees, and of key members of Congress and Parliaments, plus commercial banks and other finance institutions, economic and financial publications, and academe.
These cadres have sustained a cohesion that the SDS and its community don’t even dream about.