I was really responding to the start of this thread, but the larger situation, including for your questions, is just awful. I wrote something: The economy is IMPORTANT, but academic econ is a disaster. So, we have to roll back from academic econ and proceed mostly just empirically. For that, the AIG problem, etc. clearly show that we do need much more data. Net, we just didn't know accurately enough to know what was coming even to see within 6 percentage points in the unemployment index, say, from 4% to 10%.

Policy makers in DC just didn't have any solid advice, from academic econ or elsewhere. So the policy makers took chances and hoped. Such things don't happen in public policy where there is solid advice: E.g., we know darned well just what the F-22 can do. Aeronautical engineering is highly competent; academic econ is not.

Academic econ needs to get real, and start like biology did -- get the data and be descriptive. Actually, physics did that, too: Get the data on the motion of the planets and eventually observe that the orbits were ellipses. Finally (1) invent calculus, (2) postulate the law of gravity, (3) postulate that force equals mass times acceleration, (4) argue about motion under a central force being in a plane, (5) finally derive that the orbits have to be ellipses as observed. Easy it's not. But have to start with observing reality, and here academic econ fails.

We will be safer if we use a lot of good empirical data and a lot of common sense and prudence and set aside bad theory.

I would add that academic econ should put more focus on what is not known and may not be knowable as well. Learn to accept and work within and around that constraint, rather than try to assume it away.

Additionally, academic econ favors optimization and efficiency at the cost of robustness and self sufficiency. It would be in the best interest of the country to reverse that, or at least strike a more healthy balance.