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Economics in the mirror of the financial crisis

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  • Signorino, Rodolfo

Abstract

The structure of the Chapter is as follows. In Section 2 I discuss some of the factors that may have played a role in causing the crisis and emphasise that supporters of different economic theories will assign different weights to each factor in their analyses. As a consequence, suggested economic policies are highly sensitive to the economic theory employed in evaluating the set of causes. In Section 3 I seek to defend economists from the common charge that their inability to foresee the crisis is a clear sign of the lack of scientific status of their discipline. In my view, the main liability of mainstream economics lies elsewhere, in its excessive trust on the self-equilibrating mechanisms of free-market economies. Mainstream macroeconomists, enamoured of the efficient financial markets hypothesis, may have been too hasty in dismissing the financial instability hypothesis proposed by Keynes and developed by Minsky. Section 4 briefly outlines Keynes’s and Minsky’s contribution on this subject while Section 5 concludes.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39470.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:39470

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Related research

Keywords: global financial crisis; symmetry thesis; John Maynard Keynes; Hyman Minsky;

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  1. Marvin Goodfriend, 2004. "Monetary policy in the new neoclassical synthesis : a primer," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 21-45.
  2. James Crotty, 2008. "Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’," Working Papers wp180, Political Economy Research Institute, University of Massachusetts at Amherst.
  3. Palma, J.G., 2009. "The Revenge of the Market on the Rentiers: Why neo-liberal Reports of the end of history turned out to be premature (Updated 19 December 2011)," Cambridge Working Papers in Economics 0927, Faculty of Economics, University of Cambridge.
  4. David Laidler, 2009. "Lucas, Keynes, and the Crisis," UWO Department of Economics Working Papers 20092, University of Western Ontario, Department of Economics.
  5. Hyman P. Minsky, 1992. "The Financial Instability Hypothesis," Economics Working Paper Archive wp_74, Levy Economics Institute, The.
  6. L. Randall Wray, 2009. "The rise and fall of money manager capitalism: a Minskian approach," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 807-828, July.
  7. Buiter, Willem H, 2007. "Lessons from the 2007 Financial Crisis," CEPR Discussion Papers 6596, C.E.P.R. Discussion Papers.
  8. Alfredo Gigliobianco (editor) & Gianni Toniolo (editor), 2009. "Financial market regulation in the wake of financial crises: the historical experience," Workshop and Conferences 1, Bank of Italy, Economic Research and International Relations Area.
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