Will the good times keep rolling?

Brendan Reim, Contributing Writer

These days, the economy seems to be on the up and up. Second quarter GDP results tracked economic growth at a comfortable 4 percent annualized rate. Standard and Poor’s (S&P) has hit an all time high, and unemployment is slowly returning to normal levels. This economic expansion has lasted over five years–longer than most post-recession periods of growth since the end of World War II. A couple of questions are then raised: is the end of this expansion in sight, and are we about to run into another crisis?

The tricky thing about a recession is that almost no one sees it coming, making things exponentially worse when it does strike. Looking back at the Great Recession, only a handful of economists foresaw the impending doom. These prophets were largely dismissed by the mainstream economic community as “chicken little”-esque. But here we are six years down the road from the Lehman collapse; we have learned from our mistakes and are now smarter and wiser for it … right?

Well, smarter and wiser might be a bit of a stretch. Since the crash, the world of academic economics has been in a state of flux. The Neo-Classical School, the predominant pre-crash school of economic thought, has come under a tremendous amount of criticism. Many see its inability to predict the crash as indicative of the failure of their theories. The old gods have fallen, but none have risen to replace them. The government stimulus package marked a rebirth in Keynesian economics, but we still lack a unified theory of macroeconomics.

In the world of macroeconomics, finding direct cause and effect is nearly impossible. In this vacuum of hard facts, ideology has come to dominate. Today conservative and liberal economists insert their own beliefs where the theories fall short, contributing to the overall confusion in the world of macroeconomics and politics. Unfortunately, these biased conjectures are often expounded as hard economic truths, which only delays intellectually honest work in the field.

Are we doomed to run into another crash soon? Maybe. Currently economic fundamentals look good, inflation is low, and there doesn’t seem to be a gross imbalance in any market. While I wouldn’t expect the world of academic economics to save us from a crash anytime soon, we might be more inclined to listen to those saying that the sky is falling than we were back in 2007.

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