Skidelsky on if economists failed to foresee the dangers posed by uncontrolled capitalism hinged on mathematical models and detached from reality:
Skidelsky believes economists missed the danger signs ahead of the financial crisis. They were preoccupied with sophisticated mathematical models – a serious weakness, he says, in academic teaching of the discipline – and they were over-confident in self-regulation of the market.
He blames this mindset on the revival of anti-Keynesianism in the 1970s when government intervention in the economy made way for supply-side theory of tax cuts and labour market deregulation. But Keynesians, too, were guilty of overreaching: they assumed the state was capable of fine-tuning demand to mitigate the effects of the economic cycle. Today, Keynesianism has reasserted itself through multi-billion pound government interventions to stimulate the economy and recapitalise the banking system. Skidelsky is no statist but he says the crisis has exposed serious weaknesses in economic policy, from the Bank of England’s inflation targeting (“They did not have the tools”) to the Labour government’s belief in light-touch regulation.
A famous quote from Keynes:
The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy a task ... if they can only tell us that when the storm is past the ocean is flat again.