They realize they were wrong. We agree.

In the Foundation trilogy Isaac Asimov propounds the theory of Psychohistory which is based on the premise that taking a vast number of people it will be possible to predict future events mathematically. This theory was proved spectacularly wrong when the arrival of one person, The Mule, completely changed events. Modern macroeconomics is also based on mathematics which is why it crashes time and again by not taking human behavior into account. Yet Adam Smith, whose book ' The Wealth of Nations ' is the basis of classical economics, said," It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest." Thus economic behavior of human beings depends on self interest and not on altruism. But does a person decide his self interest based on reasoned logic? Turns out that people make economic decisions based on how they perceive a situation and not on pure logic. Stock market brokers have know this for a long time. Now in a book called ' What Have We Learned ' a bunch of very famous economists acknowledge their mistakes and describe what they have learnt from the recent financial crisis in the world. Apparently past experience had not prepared anyone for the financial meltdown on 2008 and central banks had to resort to new measures like zero interest rates and quantitative easing to avoid a 1930s type depression. They agree that banks need cyclical capital buffers to avoid bankruptcy like Lehman Brothers and countries like India need to manage exchange rates, which is what the RBI doing by buying dollars from the market, to control the effects of pro-cyclical flows. What that means is that extremely loose monetary policies in western countries is causing a flood of dollars into Indian stocks and bonds, making the rupee stronger, but could cause a collapse in its value if flows reverse, as happened last year. Why did they not learn from the humiliating exit of the sterling from the EU's Exchange Rate Mechanism more than 20 years ago? The currency is our asset so it would be silly to let speculators control its level. Already asset prices across the world are rising so fast that they are causing alarm. " Overall, it is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and understanding economic developments globally," said a report from the Bank of International Settlements. Fed Chairman, Janet Yellen talked about " pockets of increased risk taking across the across the financial system ". Human beings will always be unpredictable. There is no mathematical formula for greed, cunning and stupidity.