Addressing_Economic_Crises_The_Reference

Addressing_Economic_Crises_The_Reference - Addressing...

Info icon This preview shows pages 1–4. Sign up to view the full content.

Addressing Economic Crises: The Reference-Class Problem Xavier De Scheemaekere, Kim Oosterlinck and Ariane Szafarz Addressing crises raises a sharp reference-class problem in economics. Namely, economic theory lacks an inclusive and consistent classification of crises. This problem stems from the fact that economists tend to adapt their views on crises to recent episodes, and omit averted and potential crises. They thus fail to imagine innovations in the forms crises can take. We identify three main factors that hamper the economic analysis of crises: the lack of imagination, sample biases, and the Peso problem. Using several historical examples, this paper argues that only an ex ante classification of crises derived from a conceptual approach would address the reference-class problem properly. Multiple-solution models offer a promising avenue to solve this problem. JEL Classifications: B40, G01, G17, N00 Keywords: Economic Crisis, Economic History, Single-Case Probability, Epistemology CEB Working Paper N° 12/024 September 2012 Université Libre de Bruxelles - Solvay Brussels School of Economics and Management Centre Emile Bernheim ULB CP114/03 50, avenue F.D. Roosevelt 1050 Brussels BELGIUM e-mail: [email protected] Tel. : +32 (0)2/650.48.64 Fax : +32 (0)2/650.41.88
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

1 Addressing Economic Crises: The Reference-Class Problem Xavier De Scheemaekere F.R.S.-F.N.R.S. Research Fellow Université Libre de Bruxelles (ULB), SBS-EM 1050 Brussels, Belgium Kim Oosterlinck Université Libre de Bruxelles (ULB), SBS-EM, Centre Emile Bernheim (CEB) 1050 Brussels, Belgium Ariane Szafarz* Université Libre de Bruxelles (ULB), SBS-EM, CEB and CERMi 1050 Brussels, Belgium September 2012 Abstract Addressing crises raises a sharp reference-class problem in economics. Namely, economic theory lacks an inclusive and consistent classification of crises. This problem stems from the fact that economists tend to adapt their views on crises to recent episodes, and omit averted and potential crises. They thus fail to imagine innovations in the forms crises can take. We identify three main factors that hamper the economic analysis of crises: the lack of imagination, sample biases, and the Peso problem. Using several historical examples, this paper argues that only an ex ante classification of crises derived from a conceptual approach would address the reference-class problem properly. Multiple-solution models offer a promising avenue to solve this problem. JEL: B40, G01, G17, N00 Keywords: Economic Crisis, Economic History, Single-Case Probability, Epistemology. + Corresponding author. Address: ULB, SBS-EM, CEB, Av. F.D. Roosevelt, 50, CP114/03 1050 Brussels, Belgium; Phone: +32.2.650.48.65; Fax: +32.2.650.41.88; E-mail: [email protected]
Image of page 2
2 “Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution”.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern