Crash Week at the Institute for New Economic Thinking has come to a close. Thank you to all of our authors who wrote such great pieces and to our community who participated in the vibrant discussion on social media.
Below is a list of all our Crash Week features in case you missed one!
1. The Financial World Five Years after Lehman Brothers – Rob Johnson
Crash Week kicked off with a contribution from Institute President Rob Johnson on how the financial sector has (and hasn’t) changed since the crisis. There is still a long way to go, Johnson says.
2. The Failure of Free-Market Finance – Adair Turner
Crash Week continued with a piece from Institute Senior Fellow Adair Turner. Turner, who previously headed the U.K. Financial Services Authority, says it’s time to abandon the old economic paradigm that failed to see the crisis coming. But although the pre-crisis orthodoxy failed, Turner explains how economics can help society get back on track.
3. Simon Johnson: The Problem of Too Big to Fail is Even Bigger Than Before 2008
In this interview, Institute Advisory Board member Simon Johnson takes on the problem of banks that are too big to fail and the ongoing troubles in the financial sector. He makes the case that big changes are needed in the financial sector to avoid a repeat of 2008.
4. Did Capitalism Fail? Looking Back Five Years After Lehman – Roman Frydman and Michael Goldberg
Next up, the Institute’s Roman Frydman and Michael Goldberg look at what the crisis had to say about capitalism as an economic system. They argue that while the system didn’t fail in 2008, the economics profession did. They take aim at the flawed assumptions underlying the predominant financial models and make the case for imperfect knowledge as a key part of understanding how the financial system functions.
5. Learning from Lehman: Lessons for Emerging Markets from the Financial Crisis – Liu Mingkang
Offering a more international take, Liu Mingkang of the Fung Global Institute in Hong Kong explores the lessons from the 2008 crisis for emerging markets. Mingkang suggests that financial regulation is an international project but that cooperation will remain difficult as long as financial regulation is handled nation-by-nation. He also says that Asian economies should not repeat the mistakes of the West and should make international financial stability a key goal.
6. The Lehman Crisis and the Unfinished Business of Financial Reform – Engelbert Stockhammer
Institute grantee Engelbert Stockhammer looks at the progress on financial reform in the U.S. since the crisis. Unfortunately, the prognosis isn’t good. He argues that serious financial reforms are still needed to overcome the ongoing problems in the financial sector.
7. The End of 'Financialization' – Andrew Sheng
Institute Advisory Board member Andrew Sheng explores “the end of the world’s love affair with financialization.” Sheng, a member of this year’s TIME 100, connects financialization to growing inequality and an increasingly concentrated financial sector. He argues that we need an economic rebalancing away from the short-term mentality that has dominated financial markets in recent years and toward a renewed focus on the real economy.
8. The Next Financial Crisis – Eric Weiner
The Institute’s Eric Weiner looks at how the dynamics underlying the 2008 housing bubble have changed since the financial crisis. Unfortunately the answer is not much. Weiner, who publicly called the previous crash right before it hit, says that unless we learn the lessons from the last crisis it’s only a matter of time before we have to face the next one.
9. Current Account Rebalancing Since the Crisis – Laura Barbosa de Carvalho
Institute grantee Laura Barbosa de Carvalho looks at changes in the U.S. current account deficit since the crisis. While the deficit has improved somewhat since 2008, Carvalho cautions against being too optimistic. She points to trends in economic data since the crisis that undermine the idea that the U.S. economy is back on track.
10. Bankers Will Be Let Off the Hook If We Don't Start to Take Ourselves Seriously – Stephen Kinsella
Institute grantee Stephen Kinsella looks at the situation in Ireland and argues that the public should be demanding that those responsible for bringing down Irish economy be held responsible for their actions. Kinsella notes that even the U.S. looks good compared to Ireland when it comes to holding bankers to account. He also reminds us of the real economic consequences that the crisis created and why we shouldn’t put the burden of recovery on those who didn’t cause the crash.
11. Lehman Was Not Alone – Systemic Risk in the 2008 Crisis – Robert Engle
Nobel laureate Robert Engle looks at his data on systemic risk and offers some surprising conclusions about the situation in the financial sector in 2008. Essentially, Engle finds that the 10 banks with the most systemic risk were rescued. While Lehman was allowed to go bankrupt, it was only 11th at the time in terms of systemic risk. Washington Mutual, which also was allowed to fail, was ranked 14th. This means that the policies that were followed were in line with Engle’s measures of systemic risk. But is it enough to just rescue the10 banks with the greatest exposure? Where should the bailouts stop? Engle says the best answer is to improve financial regulation now so that we don’t have to face the question again anytime soon.
12. Five Years after the Crisis, Economics Still Needs to Change – Corrado Di Guilmi
Institute grantee Corrado Di Guilmi argues that the change in economics since the crisis hasn’t been radical enough. While Di Guilmi points to some positive changes in the areas of financial regulation and financial modeling, he argues that even these improvements have been limited and suffer from a failure to view the system in a holistic fashion. He says that this lack of change means that it’s not a question of if we’ll have another financial crisis, but when.
13. Simon Johnson: Too Big to Fail and the State of Finance Today
In this “New Economic Thinking” interview, Institute Advisory Board member Simon Johnson speaks about the need for better financial regulation. As Johnson has forcefully noted in his book “Thirteen Bankers,” we are well on the way to making the same mistakes again. Watch the interview to see how Johnson says we can get the financial sector back on track!
14. A Model’s Crisis – Elira Karaja and Elham Saeidinezhad
Institute economists Elira Karaja and Elham Saeidinezhad look at how the financial crisis exposed the shortcomings in financial modeling. They argue that a reliance on unrealistic assumptions prevented the traditional models from seeing the crisis coming and suggest that the financial sector should be a key component in economic models going forward.
15. Five Years on from Lehman: The More Things Change, the More They Stay the Same – Marshall Auerback
The Institute’s Marshall Auerback looks at the government response to the 2008 crisis and how it differed from what happened during the Great Depression. While government social programs prevented an economic downturn as severe as the Depression, Auerback argues that we’re still far from “Mission Accomplished.” He points to the need to get back to full employment and to help underwater borrowers rather than just the big banks.