The Crisis of Economic Thought

When analyzing the causes of the crisis, it appears that the existing economic paradigms no longer suit the global reality of our lives. While the old thought patterns that have dominated the world for more than a hundred years seem significantly lacking, new thought patterns that match the current reality and would help cope with the crisis are simply nonexistent.

Many economists and financiers disagree on modes of action or predictions, but that only emphasizes the faults of the existing paradigms in addressing the world’s economic and financial challenges. Nevertheless, the crisis waits for no one. Each day, as it expands and becomes more systemic, the danger of global economic shutdown intensifies.

At the end of the day, it is a crisis that stems from the gap between the currently prevailing economic thought, and the concept that should prevail in the global-integral world we live in. As Prof. Joseph Stiglitz put it in a lecture titled, “Imagining an Economics that Works: Crisis, Contagion and the Need for a New Paradigm,” “The test of any science is prediction. And if you can’t predict something as important as a global financial crisis or the magnitude of the one that we are going through, obviously something’s wrong with your model.” [113]

[113] “Short films from the 2011 Lindau Nobel Laureate Meeting in Economic Sciences,” The New Palgrave Dictionary of Economics Online, http://www.dictionaryofeconomics.com/resources/news_lindau_meeting http://www.dictionaryofeconomics.com/resources/news_lindau_meeting (see Stiglitz’s lecture, minute 1:36)