How We Think About the Economy is What Made It Fail

#Money

Wed, Aug 24th, 2011 20:00 by capnasty NEWS

Thought-proving article on Al Jazeera by Paul Rosenberg, where he argues that the American financial crisis could have been avoided had leaders thought about the economy metaphorically different. The financial sector, explains Rosenberg, should be seen as a "machine" that needs constant maintenance and attention, rather than a self-regulating "body" that should be left alone.

The sustained financial crisis that the US government now finds itself in was entirely avoidable, according to a paper by Berkeley economist Brad DeLong last year, Battered but Not and Beaten. The situation in late 2008 was dire, he explained but, he was convinced, "we were going to get out of this with only minor damage to the economy, for we did have (a) the technocratic knowledge, (b) the policy tools, and (c) the political will to escape from the trap".

In my super-short summary, he was wrong about (c). And whomever you blame for it, one thing should be clear: a multitude of cognitive confusions contributed to this failure, leading people again and again to turn away from the tough choices, to become distracted, misdirected or preoccupied with other matters.

Read the full article here.

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