Consequences of the constant blindness of some economists? Economic crises and debacles

Dr. Franco Lotito C. – Academic, writer and researcher (PUC-UACh) –

Already in 2009 –on September 6, 2009, to be very precise–, the Nobel Prize in Economics, Paul Krugman, accused the economists of his country of “complete blindness” in an article published in The New York Times, for having been incapable of correctly interpreting the numerous signals and warnings that came from the markets before the debacle and the great subprime economic crisis occurred, between August 2007 and September 2008, as a consequence of the existing monetary disorder, large-scale speculation, the total absence of controls and the abundance of “sweet silver”

In his article entitled: “How did the economists get it so wrong?” ( Paul Krugman concluded that “Economists were blind to the possibility of catastrophic failures in the market economy”directly blaming their peers for not having been able to listen to the warning voices and foresee, in this way, the great economic crisis that was coming and that, later, devastated the economy of dozens of nations and with multimillion-dollar economic losses.

Well, the same thing happened in our country, when some acquaintances “Economists of the retirement of the AFPs”as well as politicians of great influence –and champions in taking care of their partisan interests– assured the person who would become the future president of the nation that “Absolutely nothing would happen to the national economy as a result of the repeated withdrawals that were being made from the pension funds”and that the economists who claimed otherwise were just poor “alarmist subjects” and mere “cuckoos of terror” that the only thing they wanted was to instill fear and fear in the population to protect the interests of big business.

If it weren’t for the fact that we are living through dramatic and convulsive times, the disqualification made by these individuals who were warned in advance about the serious consequences and negative effects that the numerous withdrawals from the AFPs and the circulation of extremely high sums of money would have on the national economy, would make us laugh out loud and make fun of these little national characters who behaved like simple “blind and deaf subjects” in the face of multiple warnings, voices of alert and repeated calls to be prudent and not overheat the economy. Today, those same “retirement economists” they have remained speechless and perplexed before the mess that they promoted, and now they do not lose any opportunity to “advise against” about the temptation to incur a new withdrawal from pension funds. By the way, the warning comes quite late.

So what was it that happened? How could these guys be so wrong? The explanation is very simple: the “retirement economists” dedicated themselves to spreading the idyllic image that a perfect market existed in our country, and that said market was inherently stable and efficient, a market in which, furthermore, people would act logically, prudently and rationally when faced with so much money in the hands.

Well, none of that happened. These economists built a “artificial economic paradise” and an important part of the economic and political crisis that our country is currently experiencing – with a level of inflation never seen before for more than three decades – has shown how wrong they were and that it ended up putting “upside down” to the economy and the country. Add to the above, the subsequent war between Russia and Ukraine, the overheating of the economy, the slowdown in the Chinese economy and the –in advance– announced global economic recession led by the United States and Europe, and we have the “perfect economic storm”.

Starting from the false premise that there was “perfect order” based on supposedly efficient markets, “happy retirement economists” developed mathematical models that ensured a “rational behavior of people and markets”Not the uncontrolled spending and irrational behavior that ensued, behavior that is unfortunately quite common in real life human beings.

The great English physicist, mathematician and inventor, Isaac Newton, already pointed this out several centuries ago, when he assured that he could perfectly calculate the movement of the stars in the universe, but that it was impossible for him to predict the degree to which irrationality could reach human.

Even more. Dr. Daniel Kahneman, psychologist and winner of the Nobel Prize in Economics in 2002, demonstrated with his empirical findings the falsity of the assumption of the “human rationality” which, to our surprise, is still prevalent in modern economic theory. Dr. Kahneman’s work on the psychology of judgment in situations of uncertainty, economic decision making, as well as the economic behavior of human beings, have shown that this human being remains a being dominated by his emotions and, more often than is believed, it turns out to be an unstable, unpredictable and irrational subject in making economic decisions. And if it were necessary to have another indicator about the emotional lack of control that affects human beings, it is enough to see the level of violence, brutality and aggressiveness that we are reaching.

Paul Krugman himself, winner of the Nobel Prize in Economics in 2008, assures that Behavioral Economists – behavioral economists – in line with the research of Dr. Daniel Kahneman, have made very valuable and significant contributions to economic theories , because they have based their studies, analyzes and observations, not on the utopian theory of those erroneous retired economists who “praise human rationality” and who say fervent prayers to the existence of the “perfect and efficient markets”, but base their studies on the real behavior of human beings and the negative effect that emotional instability has on them when making decisions. And this behavior leaves a lot to be desired.

In short: the fundamentalist and Taliban economists of the perfect and efficient markets have ended up causing enormous damage to the national economy, contributing to generate great inflationary pressures and economic destabilization that today directly and seriously affects the most vulnerable population of our country. , that is, to several million families.

Worst? Is “perfect economic storm” it is far from over, especially when we still have certain economists who have been unable to learn the hard lesson, a lesson and stubbornness that, unfortunately, the poorest always end up paying for.

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Consequences of the constant blindness of some economists? Economic crises and debacles