Economics fails to resolve exceptions to the rule - FT.com

Economics fails to resolve exceptions to the rule - FT.com

By John Kay

As the financial crisis continues to evolve, the Queen’s question at the London School of Economics – why have academic economists so little to contribute to predicting the course of events – continues to be all too pertinent.

Robert Lucas, professor of economics at the University of Chicago and Nobel Prize winner for his seminal contributions to macroeconomics, proffered an answer in 2009. The crisis was not predicted, he explained, because economic theory predicts that such events cannot be predicted. Faced with that response, a wise sovereign will seek counsel elsewhere.