The disaster shows that it is time to move on

Ruines field This is what looks like the economics two years after the bankruptcy of Lehman Brothers, culminating to a still unfinished crisis. A crisis where economists have a heavy responsibility, because they were encouraged by their analyses a range of decisions and attitudes based on a simple but false idea: the market left to itself is always the best tool to achieve the best balance. Since then, there are more discussions on usefulness (in). Or their citations confessing their blindness, their convenience or their own systemic crisis.

Yet, there is still a Conference of economists. And, in the Congress, can even be found valuable insights. This was the case of the two conferences data Friday at the Colloquium of the French economic science Association (AFSE), which brings together academics and researchers from public institutions or private. Roger Guesnerie, Professor at the College of France, a diagnosis for the shot without complacency. It describes a balkanisée science, working on wrong assumptions. "Economists write models that are fun but which are unrealistic" - a still present through in some of the work presented at the Symposium. The man is certainly rational, as most researchers assume, but this rationality bute on limits. This is true in our decisions as in our expectations. Or the "incredible" of the rational expectations hypothesis has been at the heart of the apparatus that has emerged since the end of the 1960s, and who had disqualified public action. The era of John Maynard Keynes, 1930s to the 1960s, was succeeded by Milton Friedman, 1970s to the end of the 2000s. The disaster shows that it is time to move on.

André Cartapanis, Professor at Sciences po Aix and President of the AFSE, precisely explained that there is life beyond the field of ruins. Just look to previously considered authors as part of the vieillerie or heresy. There are actually three lines of research to understand what happened. First, the historians such as Charles Kindleberger or recently Kenneth Rogoff and Carmen Reinhart. Their works show how, many times in history, an excess of confidence resulted in a climate often deregulation, undervaluation of risk, a credit boom and a runaway debt leading to a crash.

Then, the theorists of the instability. As early as 1802, the British Henry Thornton had theorized the Bank contagion and liquidity crisis: "If defiance spread, the caution is that it neglects the small benefit of an interest of a few days and that his supply of banknotes ready to deal with the necessary time." A century later, the Swedish Knut Wicksell analyzed the "cumulative process" that develops in the finance, amplifying the booms and falls. Keynes, he stated that "the risk of a predominance of speculation tends to grow as the Organization of the markets is progressing". More recently, researchers, including Roger Guesnerie, showed how the speculation could be destabilizing. Third line: those who throw bridges between economy and finance at the global level, dissecting the links between individual behaviour and collective risks. The unorthodox French Michel Aglietta here leads the most exciting work.

Economists will now have to gather that Willem Buiter, a former Bank of England became "chief economist" of the Citigroup Bank, called the "Potpourri" of theories, which could add the "animal spirits" of George Akerlof and Robert Shiller. The "macrofinance" born of the "great recession" as macroeconomics was born of the great depression. Macrofinance articulated to macroeconomics, which will naturally be macro-prudential regulations that emerge in the G20 and others. But it will not suffice. To explain the world, to turn better, to become almost as useful as the dentists cited as an example by Keynes, economists will also be evidence of a quality which has not smothered so far: humility, before the men and the facts.