Recently I was listening to podcast in which someone posed the following question: What can central bankers learn from academic economists and vice-versa. To which the answer was a surprising “Not much”! Apparently, the reason for this is that the best central bankers are the best academics. Now this was burped out as if it was a good thing, but I couldn’t disagree more. This is probably the reason we are currently living in high financial turbulence and probably heading for a 30s style recession: too much cross pollination between the practical world and the academic world. This kind over-pollination is never a good thing. Look at the example of the hedge fund set up in 1994 by Myron Scholes and Robert Merton, joint winners of the 1997 Nobel prize in economics. It had the best of all possible credentials but it went bust in 1998. Theory and practive rarely marry that well and economics as discipline suffers seriously from this.
Another financial problem