Summary:
From Lars Syll
In contrast to the experience of the Great Depression, which led to the emergence and acceptance of novel theoretical concepts on a large scale, the financial crisis and its consequences have, by and large, been rationalized with reference to existing theoretical concepts. Although we do observe a slight shift away from the idea that financial markets are efficient by default and prices only follow random walks, the basic conceptualization of (financial) markets as being efficient and equilibrating in principle seems unquestioned. On the contrary, the rising prominence of the concept of “liquidity” – understood as the availability of funds to absorb financial assets to be sold – in the aftermath of the crisis indicates that the financial crisis is seen by economists as a
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from Lars Syll
In contrast to the experience of the Great Depression, which led to the emergence and acceptance of novel theoretical concepts on a large scale, the financial crisis and its consequences have, by and large, been rationalized with reference to existing theoretical concepts. Although we do observe a slight shift away from the idea that financial markets are efficient by default and prices only follow random walks, the basic conceptualization of (financial) markets as being efficient and equilibrating in principle seems unquestioned. On the contrary, the rising prominence of the concept of “liquidity” – understood as the availability of funds to absorb financial assets to be sold – in the aftermath of the crisis indicates that the financial crisis is seen by economists as a major external shock, unforeseen because of the limits imposed on rational behavior by asymmetric information, and not as something intrinsic to the economic process. Similarly, our analysis of the reception of major crisis-related books shows an only temporary increase of interest in classic contributions dealing with financial and economic instability, which was even weaker for more distinguished journals. These observations signify a key difference in terms of the ‘lessons learned’ from past crises when compared to the Great Depression, which gave rise to a broad consensus that capitalist economies are not self-sustaining, a consensus that eventually helped to forge the mixed economies dominating the richer parts of the planet.
E Aigler, M Aistleitner, F Glötzl & J Kapeller
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