In 2008, as the global financial crisis unfolded, the reputation of economics as a discipline and economists as useful policy practitioners seemed to be irredeemably sunk. Queen Elizabeth captured the mood when she asked pointedly why no one (in particular economists) had seen the crisis coming. There was no doubt that, notwithstanding the few Cassandras who correctly prophesied gloom and doom, the profession had failed colossally.
The totemic symbols of this failure were, of course, the two most important policymakers, Alan Greenspan and his successor as chairman of the US Federal Reserve, Ben Bernanke. They, among many others, helped create a belief system that elevated markets beyond criticism.
But crises will always happen and, even if there is a depressing periodicity to them, their timing, form and provenance will elude prognostication. Most crises, notably the big ones, creep up on us from unsuspected quarters. As Keynes wisely observed: “The inevitable never happens. It is the unexpected always.” So, if the value of economics in preventing crises will always be limited (although hopefully not non-existent), perhaps a fairer and more realistic yardstick should be its value as a guide in responding to them. Here, one year on, we can say that economics stands vindicated.