Economists eat their own

Krugman’s blog links to a WSJ article and blog post that describe the reception an IMF economist got when he presented a paper daring to suggest that the widespread securitization of risk was risky:

January 3, 2009

Economists behaving badly

Ouch. The WSJ’s Real Time Economics blog has a post linking to Raguram Rajan’s prophetic 2005 paper on the risks posed by securitization — basically, Rajan said that what did happen, could happen — and to the discussion at the Jackson Hole conference by Fed vice-chairman Kohn and others. The economics profession does not come off very well.

Two things are really striking here. First is the obsequiousness toward Alan Greenspan. To be fair, the 2005 Jackson Hole event was a sort of Greenspan celebration; still, it does come across as excessive — dangerously close to saying that if the Great Greenspan says something, it must be so. Second is the extreme condescension toward Rajan — a pretty serious guy — for having the temerity to suggest that maybe markets don’t always work to our advantage. Larry Summers, I’m sorry to say, comes off particularly badly. Only my colleague Alan Blinder, defending Rajan “against the unremitting attack he is getting here for not being a sufficiently good Chicago economist”, emerges with honor.

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