Some Market Discipline for Economists

The IMF lashes itself for failing to foresee the crisis, but the only remedy would be the hazard of unemployment for its economists

by Dean Baker

Last month, the International Monetary Fund's independent evaluation office issued a remarkable report. The report quite clearly blamed the IMF for failing to recognise the factors leading up to the worst economic crisis since the Great Depression and to provide warning to its members so that preventive actions could be taken:

"It [the report] finds that the IMF provided few clear warnings about the risks and vulnerabilities associated with the impending crisis before its outbreak. […] The IMF's ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and inadequate analytical approaches."