Economics could be a Science if Economists were Scientists
|November 2, 2013||Posted by Staff under Editorials|
Economics does not have a true Nobel Prize, so a central bank decided to create a near-beer variant. The central bankers have frequently awarded economists who got it disastrously wrong.
Economists are blind to conflicts of interest and eagerly seek out such conflicts to enrich themselves. Economists are blind to ethics, even disdainful of it.
Economists do not study fraud. They have a primitive tribal taboo against using the word. Economists do not study the criminology literature on elite white-collar crimes.
Accounting fraud produces fraudulent accounting data that economists and finance scholars treat as facts. During the expansion phase of a bubble the traditional econometric study will lead economists to support the worst possible policies. Competent bank examiners never forget that accounting data can be the product of accounting control fraud.
Economists, in the rare cases where they mentioned fraud, claimed that fraud posed no risk in “sophisticated” financial markets. Economists did not simply fail to warn about the fraud epidemics – they recommended doubling down on the criminogenic policies (deregulation, desupervision, and de facto decriminalization) that Akerlof and Romer warned were “bound to produce looting.”
From 2000 to 2007, a coalition of appraisal organizations … delivered to Washington officials a public petition; signed by 11,000 appraisers…. [I]t charged that lenders were pressuring appraisers to place artificially high prices on properties [and] “blacklisting honest appraisers” and instead assigning business only to appraisers who would hit the desired price targets.
What was the reaction of many of the Fed’s senior economists to the facts of mortgage lending? They were enraged at the messengers. Their reaction was “emotional” and “heated” and directed against the supervisory messengers rather than at the fraudulent banks.