Mainstream economists did not exactly cover themselves in glory during the 2008 financial crisis. They did not see it coming.

In early 2007, Ben Bernanke famously said that early signs of distress in the mortgage market would blow over and the economy could easily handle it. He could not have been more wrong.

Even earlier, Alan Greenspan said in 1999 that derivatives did not pose a danger and they were risk-reducing because they divided risks and put individual slices in strong hands. Wrong again (Greenspan ignored the fact that derivatives can be created in unlimited quantities from thin air so the total risk is increased exponentially even as single slices of risk are put in strong hands).

Then economists did not foresee how bad the 2008 crisis would get once it did begin. Finally, economists bungled the rescue by propping up insolvent banks and ripping off savers of trillions of dollars with zero interest rate policy to preserve Jamie Dimon’s bonus money.

After all of that costly bungling, you’d think economists would be a little bit humble and willing to admit that the economics profession needs an overhaul when it comes to flawed models (like the Phillips curve and value at risk) and abysmal forecasting records. Nope. Economists are as arrogant and misguided as ever and are leading the economy to a new recession or something much worse.

This article addresses the mistakes of the economics profession and the lessons that should have been learned. But if you think that any of these lessons have been learned, guess again.

The writer says, “The macroeconomics profession has yet to come to terms with the most important lessons of the past decade.” The plain fact is that economists refused to learn any lessons from market crises in 1994, 1998, 2000 and 2008. Since most economists will never learn, the best course of action for investors is simply to ignore them.

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