The Great Debate UK
–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–
If the economics profession has sunk in public estimation in the last two or three years, it would hardly be surprising. Our failure to predict the crisis is something which cannot be simply brushed aside lightly, as some of my colleagues would love to do.
To ordinary folk, claiming to be quite good at explaining and even forecasting events in normal conditions, but admitting we simply can’t handle crises makes us about as much use as a doctor who knows how to treat ingrowing toenails and flatulence, but hasn’t a clue about how to deal with heart attacks or cancer.
Nor is that the only charge which could be levelled at the British profession. One could forgive any politician who felt bewildered by the sheer fluidity of the positions taken by the hordes of macro-economists offering advice, solicited and unsolicited, on the direction policy should take. After all, the overwhelming majority of the profession appears to be in favour of expansionary monetary policy (aka QE2) with an eye on keeping sterling weak against the euro and, if possible, the dollar (hence also against the yuan). Yet most of the same people were enthusiastic advocates of Britain joining the euro zone, in spite of the fact that the option of driving down our exchange rate in the way they advise is only open to us because we have stayed out of the single currency.
from The Great Debate:
-The views expressed are the author's own-
A warning by an International Energy Agency (IEA) analyst this week that quantitative easing (QE) risked inflating nominal commodity prices and derailing the recovery drew a withering response from Nobel Economics Laureate Paul Krugman, who labelled the unfortunate analyst the "worst economist in the world".
According to New York Times columnist Krugman "Higher commodity prices will hurt the recovery only if they rise in real terms. And they'll only rise in terms if QE succeeds in raising real demand. And this will happen only if, yes, QE2 is successful in helping economic recovery".