Better to trust astrologist than economists with Nobel Prizes

As recently as one month ago, some industrialized countries were still hesitating to admit that their economies were heading for a recession. Today the turmoil in financial markets may create a depression at a global scale. After the last crisis resembling today’s, the Wall Street Crash of 1929 that led to the Great Depression, the Dow Jones achieved its pre-1929 level only in 1954. To make any forecast at this point in time would make astrology look respectable. But looking at the Nobel Prizes this year and in 1997, when a similar crisis emerged, provides some lessons for the future. The 2008 Nobel Prize in economics was awarded to Paul Krugman this October just after the onset of the financial crisis. Krugman is an American economist who has been a critic of Long-Term Capital Management (LTCM), a hedge fund discussed below. The 1997 prize was awarded to Myron Scholes. It