Self-criticism, long de rigueur in religion, philosophy and (in a less voluntary fashion) totalitarian politics, came late to economics. Better late than never: the International Monetary Fund has published an evaluation of its performance before the financial crisis. It should be read and replicated by economists everywhere.
The IMF’s Independent Evaluation Office – set up 10 years ago after the Asian financial crisis – gives a forthright account of the Fund’s pre-crisis misses. And misses there were. The IMF’s publications noted many of the risks that later nearly exploded the global financial system, but ignored their scale and how interconnected they were. The reports’ optimistic headline messages undermined what should have been presented as causes for alarm.
The reasons were partly institutional. Within the Fund, financial experts and macroeconomists communicated badly. The organisation did not link up findings in countries where similar risks were evolving – especially the epicentres of the housing boom – nor did it fully consider the vulnerability of one country to risks in others.