These are not good days for the dominant "who could have known?" school of economics. First, they missed the housing bubble. Since it has started to unravel, they have continually understated the size of the fallout. Only now are most economists beginning to acknowledge that the economy is virtually certain to be thrown into a recession from the collapse. Fortunately, the media do not hold economists responsible for their failures. The NYT gives us yet another example of non-accountability. At the very end of an article warning that the impact of the housing collapse is likely to be substantial, the NYT reports "The German finance minister, Peer Steinbrück, said members agreed that write-offs at banks related to subprime mortgages could reach $400 billion, about four times estimates just a couple of months ago." Being off by 300 percent might be considered a serious problem in other lines of work, but apparently not for economists. For the record, I expect total losses for the financial sector to approach $1 trillion.
--Dean Baker
