BGN Entrepreneur

The blame game goes on over who is actually responsible for the worst economic recession ever since the Great Depression—the financiers who did such a bad job of managing risk or the regulators who failed to stop them.
However, the economics profession bears more than a little culpability. It provided the models that gave comfort to regulators that markets could be self-regulated, and they could be efficient and self-correcting. The efficient markets hypothesis, the notion that market prices fully revealed all the relevant information, which is ruled the day.
It is very difficult for non-economists to understand how peculiar the predominant macroeconomic models were. Many assumed demand had to equal supply and that meant there could be no unemployment. A lot of people used representative agent models, all individuals were assumed to be identical, and it meant that there could be no meaningful financial amrkets. Information asymmetries, the cornerstone of modern economics, also had no place.

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