Why economics needs to be bolder | Yanis Varoufakis responds to Vicky Pryce

Yanis Varoufakis, Vicky Pryce and Roger Hearing debate economic forecasts.

This excerpt was taken from 'Economic fact and economic fantasy,' recorded at our IAI Live online event from December 2023.

Although there has been a recent fall, central banks are widely seen to have failed to control inflation. At times running up to six times target, the banks blamed the Ukraine war, but critics point to the rapid rise in inflation before war broke out, and amongst other factors often find quantitative easing at fault. Moreover, some claim there is a more fundamental problem that there is no overall coherent economic theory in the first place. Bank models failed to predict the 2008 crash or the more recent cost of living crisis. In 2015, the European Central Bank claimed that neither monetarist nor Keynesian economics provided solutions to the financial crisis, leading some to question if any economic theory had the answers.

Should we conclude that central bank failures to predict, let alone avoid, economic crises are evidence of a deep underlying flaw in their understanding? Or were banks just negligent in their failure to respond to evidence of rising inflation? Do we need a radical new economic theory or should we conclude that the economy is not predictable, forecasting a mugs game, and the options for government policy wider than commonly supposed?

#EconomicCrisis #EconomicFailure #YanisVaroufakis

Yanis Varoufakis is a leading critic of the economic establishment. He was the former Finance Minister of Greece, a professor, bestselling author, and current chair of the Democracy in Europe Movement 2025.

Vicky Pryce is a Chief Economic Adviser at the Centre for Economics and Business Research, bestselling author and prominent businesswoman. She is also a visiting professor at King’s College London and Birmingham City University.

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Do you think central banks are failing? Let us know in the comments below!

[conorknapp]

Varoufakis’ latest book was fantastic and really set the stage for the incoming economic crisis. “Technofeudalism” takes the central bank socialism that had kept the corpse of capitalism animated since 2008 to it’s natural conclusion; the irrelevance of profit and markets in creating wealth because of the return of rents add the main source of economic growth. It was also a very enjoyable read!