In so doing he conveniently ignores those economists and investors who correctly predicted the crisis and explained in detail what was going to happen and why it was going to happen in the years before the crisis.
There's always someone predicting a financial crisis, and when it inevitably happens (and one will eventually come), someone probably predicted it. Was there anyone who predicted the crisis based on reliable methods that we could use to predict another crisis?
Easterly does have a point though - there are two ways to predict a crisis. Infer the implicit market prediction, or predict it yourself. The latter is extremely hard because as soon as you find some reliable method of predicting financial crises and tell the world about it, market prices will change to reflect this knowledge. On the other hand, as soon as the market knows about the crisis, the crisis is beginning (if people know the price of X is going to fall soon, then the price of X will fall now as they all sell it). So in some sense, a crisis has to come out of the blue.
It sounds like Easterly was being sarcastic - taking a jab and macroeconomists who DO try to predict crises.
Was there anyone who predicted the crisis based on reliable methods that we could use to predict another crisis?
The Greatest Trade Ever describes how John Paulson's hedge fund identified the coming sub-prime collapse and made $15 billion betting on it. It also covers several other investors who identified the same issues and made money, though most were not as lucky/smart with their timing as Paulson.
The crisis also looks a lot like a classic example of a credit crunch as described by Austrian business cycle theory. Peter Schiff is one of the best know...
This is our monthly thread for collecting these little gems and pearls of wisdom, rationality-related quotes you've seen recently, or had stored in your quotesfile for ages, and which might be handy to link to in one of our discussions.