The Boston Fed exonerated economists by calling bubble warnings minority views with poor data

Evidence

After the fact, some economists at the Boston Fed decided that, because one would encounter a range of opinions on that issue before the crisis, there is no justification in blaming the profession for missing the disaster. They wrote: “Economic theory provides little guidance as to what should be the ‘correct’ level of asset prices—including housing prices … While optimistic forecasts held by many market participants in 2005 turned out to be inaccurate” those projections were not “unreasonable” given what was understood about the economy and housing market dynamics in the years before housing prices crashed. “The pessimistic case was a distinctly minority view, especially among professional economists … The small number of economists who argued forcefully for a bubble often did so years before the housing market peak, and thus lost a fair amount of credibility” in the process. Others spotted a bubble with “arguments fundamentally at odds with the data” that became available after the fact. “Academic research available in 2006 was basically inconclusive and could not convincingly support or refute any hypothesis about the future path of asset prices.” — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 532

Categorization

• QUESTION: Worth chasing: did any Boston Fed economists acknowledge that minority-status of a view is itself an artifact of professional enforcement rather than evidence of its wrongness?
• XREF: connects to: Mainstream economists exonerated Bernanke while scapegoating Greenspan for the crisis — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 512; Economists who warned of a housing bubble were purged from Fed advisory positions — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 532; The efficient-markets hypothesis erased discussion of bubbles and speculation — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 749 (+2 more)

Broader Connections

• Mainstream economists defended theory by scapegoating Greenspan-style market fundamentalism #expands (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 700
• The Great Recession triggered a redoubling of deliberate ignorance production in economics #exemplifies (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 629
• The efficient-markets hypothesis erased discussion of bubbles and speculation #complicates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 749