All the Fellows of British Academy who were economists felt compelled to reply. Tim Besley and others thus wrote a letter to the Queen, the essence of which said
Everyone seemed to be doing their own job properly on its own merit. And according to standard measures of success, they were often doing it well. The failure was to see how collectively this added up to a series of interconnected imbalances over which no single authority had jurisdiction. This, combined with the psychology of herding and the mantra of financial and policy gurus, lead to a dangerous recipe. Individual risks may rightly have been viewed as small, but the risk to the system as a whole was vast.
So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.
Failure of collective imagination! ... lucky for us all the engineers don't have the same problem, or we'll end up with lots of beautiful nuts and bolts that don't quite fit each other.
Samuel Brittan, who's among the FBAs that signed the letter, observed...
It is fruitful to enquire who economists are and what they actually do. This was attempted by the Royal Economic Society in a survey summarised by Ruth Towse and Mark Blaug in an Economic Journal article in March 1990. They came up against the problem that, in contrast to, say, engineers or accountants, “there is no precise way to define the economics profession”. They settled for “someone with at least a second degree in economics” (which thankfully lets me off the hook). Only 8 per cent of economics undergraduates went on to higher degrees but “this has never been allowed to undermine the perception of most academic teachers” that “all their pupils must be trained as if they were going to be professional economists”.
On this definition they estimated that in the UK there were then 3,500 practising economists of whom 2,500 were academics, 600 in private business and 400 in the government. The high salaries paid to some City economists were “atypical”. My own observation is that their repute declined so much after events such as the UK’s forced departure from the exchange rate mechanism in 1992 that some practitioners redefined themselves as “strategists”.
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