Tuesday , November 5 2024
Home / Lars P. Syll / After the crisis — business as usual

After the crisis — business as usual

Summary:
After the crisis — business as usual 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

Topics:
Lars Pålsson Syll considers the following as important:

This could be interesting, too:

Lars Pålsson Syll writes Daniel Waldenströms rappakalja om ojämlikheten

Peter Radford writes AJR, Nobel, and prompt engineering

Lars Pålsson Syll writes MMT explained

Lars Pålsson Syll writes Statens finanser funkar inte som du tror

After the crisis — business as usual

After the crisis — business as usualIn 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

Advertisements
Lars Pålsson Syll
Professor at Malmö University. Primary research interest - the philosophy, history and methodology of economics.

Leave a Reply

Your email address will not be published. Required fields are marked *