We failed to foresee recession: UK economists to Queen
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Last Updated: Sunday, July 26, 2009, 20:25
London: A group of top British economists have written to Queen Elizabeth, acknowledging their failure to forsee the timing, extent and severity of the recession that has hit the country and the world, blaming it on "a failure of the collective imagination of many bright people."

In their letter to the British monarch, signed by London School of Economics professor Tim Besley, a member of the Bank of England monetary policy committee, and eminent historian of government Peter Hennessy, they said a "psychology of denial" had gripped the financial and political world in the run-up to the crisis.

The three-page missive blamed "a failure of the collective imagination of many bright people". It was sent after the Queen, during a visit to London School of Economics in November last year, asked why no one had predicted the credit crunch, The Observer newspaper reported on Sunday.

Despite these yawning imbalances, they said, "financial wizards" managed to convince themselves and the world's politicians that they had found clever ways to spread risk throughout financial markets -- whereas "it is difficult to recall a greater example of wishful thinking combined with hubris".

"In summary, Your Majesty," they said, "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."

Besley stressed that the experts had not been in "finger-wagging mode" and had agreed that the causes of the credit crunch were extremely complex. "There was a very complicated, interconnected set of issues, rather than one particular person or one particular institution."

A spokesman for Buckingham Palace said the Queen has displayed a particular interest in the causes of the recession, summoning Bank of England governor Mervyn King to a private audience earlier this year to explain what he was doing to tackle it.

Official figures published last week revealed that Britain's economy has now been contracting for 15 months, and the recession is deeper than any since the 1930s, outside of wartime.

Bureau Report

First Published: Sunday, July 26, 2009, 20:25

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