October 2011

Edwin M. Truman responds to Charles Goodhart's "Europe After the Crisis"

INET published a paper, written by Charles Goodhart, that calls for structural reforms in Europe. In Europe After the Crisis Goodhart proposes to have the President of the European Commission elected by the voters and to introduce a fiscal counterpart to monetary union. Here, Edwin M. Truman reacts to the proposals. Read more

Ed Kane - Measuring Systemic Risk To Empower the Taxpayer

About the Interview

Banks take on excessive risk since they know, in case of failure, the taxpayer will step in to rescue them. That is a form of free insurance, and Ed Kane wants to end it. To do so, he says, we need to put a number on systemic risk, the amount for which the taxpayer is on the hook. Kane uses the contingent claims model developed by Nobel Laureate Robert Merton to calculate the market value of the implicit insurance -- making the cost explicit, and so empowering the taxpayer. This is new economic thinking. Read more

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Charles Goodhart: Europe After the Crisis

“The European ideal has so much power that crisis and even division will not permanently prevail.” So says Professor Charles Goodhart. At a time when everyone else is doing crisis-mode, Goodhart, the Norman Sosnow Professor of Banking and Finance at the London School of Economics, is looking through the crisis to deeper structural reforms. “The single most important political reform for the EU is to have the President of the European Commission elected by the voters… The purpose of the exercise is to construct a European polity, and power centre, that answers directly to the people of Europe, and is not simply an apparatus managed by national political leaders.” Read more

Steven Medema: The Coase Theorem As Fiction

30 Ways to Be an Economist is INET's grantee interview series - INET grantees talk about how they do their work, and how they came to be doing it. This week: Steven Medema - The Coase Theorem As Fiction.

When externalities are present and transaction costs are absent, private parties will strike welfare-enhancing deals regardless of who owns what. In a frictionless world, bargaining leads to efficiency. That is the essence of the Coase Theorem, and it is fiction, according to Steven Medema. The world is not frictionless, which is why the Theorem is not applicable to it. And yet the theorem, distorted versions of it, entered into textbooks and came to captivate the minds of economics and legal scholars alike. Medema investigates how that came to be. Writing the intellectual history of the Coase Theorem -- this is new economic thinking. Read more

Steven Medema - The Coase Theorem As Fiction

About the Interview

When externalities are present and transaction costs are absent, private parties will strike welfare-enhancing deals regardless of who owns what. In a frictionless world, bargaining leads to efficiency. That is the essence of the Coase Theorem, and it is fiction, according to Steven Medema. The world is not frictionless, which is why the Theorem is not applicable to it. And yet the theorem, distorted versions of it, entered into textbooks and came to captivate the minds of economics and legal scholars alike. Medema investigates how that came to be. Writing the intellectual history of the Coase Theorem -- this is new economic thinking. Read more

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MEDIA MENTIONS: The Business News Network interviews Perry Mehrling

The Business News Network (BNN) interviewed Perry Mehrling, INET Senior Advisor and blogger for The Money View, about new economic thinking. Click here to watch the video (7min).

Saving the World from Godzillas: The Bretton Woods Conference

INET presents you a fascinating video that refreshes our memory of the INET Annual Conference in Bretton Woods last April. Click here to watch it.

Can Goldman Sachs fail?

That was the question MIT economics professor and INET Advisory Board member Simon Johnson asked a packed house at the Institute’s April 2011 annual conference in Bretton Woods, New Hampshire. The crowd was silent. Not a single hand went up. Johnson’s point was made. “It can’t happen,” he said. “I wouldn’t allow it to fail if it was my decision. You wouldn’t either. It’s too scary.” Read more

READING ROOM: Economics has met the enemy, and it is economics

The Globe and Mail published a long piece about the dismal science, covering a lot of ground from moral philosophy to rational expectations, from Adam Smith to this year's Nobel laureate Thomas Sargent, from the Post-Autistic Economics movement to the Institute for New Economic Thinking. Excerpts: Read more

John Davis - How to Avoid Herding in Research

30 Ways to Be an Economist is INET's grantee interview series - INET grantees talk about how they do their work, and how they came to be doing it. This week: John Davis - How to Avoid Herding in Research.

An individual fish reduces the danger to itself by swimming as close as possible to the center of the school. That is how schools hold together. John Davis says that researchers and fish are alike -- both engage in herd behavior. PhD production, the role of journals, the incestuous relationship between top universities -- Davis looks at it all with an eye to informing policy to promote diversity and alternative views in the profession -- this is new economic thinking. Read more

John Davis - How to Avoid Herding in Research

About the Interview

An individual fish reduces the danger to itself by swimming as close as possible to the center of the school. That is how schools hold together. John Davis says that researchers and fish are alike -- both engage in herd behavior. PhD production, the role of journals, the incestuous relationship between top universities -- Davis looks at it all with an eye to informing policy to promote diversity and alternative views in the profession -- this is new economic thinking.

About John Davis

Davis is professor of history and philosophy of economics at the University of Amsterdam and professor of economics at Marquette University. Full profile

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