The epistemology of the economic crisis

"History rarely repeats itself. There are some standard patterns in economic recessions, but major recessions are characterized by something novel....

"Unfortunately, initial conditions are too different from case to case to simply apply some historical template that would permit us to fully understand what is currently happening, let alone how to deal with it. Instead of explaining why this recession (or depression) is just like the others, we should attend to what is new and especially problematic about the current downturn and why it may not respond to policies modeled on avoiding the errors of the past....

"To speak of a crisis of financial epistemology may sound abstract, but it has had very concrete and disastrous consequences. Understanding this underrated aspect of our current crisis is a prerequisite for getting us out of the hole we’ve dug ourselves into...."

The rest of the article has the disconcerting details. (Via Arts & Letters Daily.)

PREVIOUSLY: Megan McArdle takes down the idea that economists know how to rescue us.