Economic sciences face credibility crisis - Well, D'OH!

Current economic forecasts expect the German economy to grow at 1.8 percent next year. It's an estimate some economists say is complete nonsens, one based on outdated models out of touch with the real world.

Economic sciences face credibility crisis - Well, D'OH! 0,,16746311_303,00

Economic sciences face credibility crisis - Well, D'OH! 0,,16746311_303,00

Ever since the outbreak of the global economic and financial crisis in 2008, economists around the world have been facing the stern question of why they haven't been able to warn politicians and the public alike of the doom unfolding.
In the absence of any satisfactory answer, some economists such as Frank Riedel have begun to question the model on which economic science bases its assumptions and predictions.
Current economic models were failing reality, the director of the Center for Mathematical Economics in Bielefeld, wrote in his latest book titled “Blaming the Economists.” The message of his clear-cut analysis of the crisis is economic predictions lack any scientific foundations.
Using Germany as an example, Riedel told DW that it was impossible to take the individual behavior of all of the country's about 40 million households and 2 million businesses into account, when making predictions about the future. Therefore, economists would resort to a representative model household and a model business for the undertaking. Using this as a vehicle, he said, was perhaps sufficient to take a philosophical look at economics, but completely inappropriate to calculate, for example, future economic growth.
The myth of ‘homo economicus'
At the centre of current economic models was the assumption that the decisions of all economic players were based on rational behavior, Riedel said. If humans were acting like ‘homo economicus' as this type of ideal human being is denoted in economic science, stock markets would never crash, he added.

More: http://www.dw.de/reading-the-crystal-ball-economic-sciences-face-credibility-crisis/a-17203380

Economic sciences face credibility crisis - Well, D'OH!

Economic sciences face credibility crisis - Well, D'OH!

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