Economic Commentary
This fall’s economic crisis found the media turning to a range of Chicago professors for commentary and advice. Here’s a sampling.
“Although it is the most severe financial crisis since the Great Depression of the 1930s, it is a far smaller crisis, especially in terms of the effects on output and employment. Both figures [unemployment and GDP] are likely to get quite a bit worse, but they will nowhere approach those of the 1930s.”
GSB professor and Nobel Prize winner Gary Becker, AM’53, PhD’55, October 7, Wall Street Journal editorial
“In order to know what we want to regulate or whom we have to bail out, we first need to know what and whom we want to protect. That decision will always be political and ideological, as well as economic.”
Associate professor of history Jane Dailey and professor of social thought David Nirenberg, September 30, Dissent online
“The moral of this story is that bad regulation metastasizes. Short term heroics are no substitute for dispassionate deregulation, which won’t happen so long as our political leaders are fixated on greed. Taking steps to prevent financial meltdowns is more likely to hasten their unwelcome arrival, so says the libertarian.”
Law professor Richard Epstein, September 22, Forbes.com
“We need a different solution: a Plan B. A plan that minimizes the money the Government uses in bailing out Wall Street and Main Street to save our precious dollars for a stimulus package, which will be essential to restarting the economy.”
GSB professor Luigi Zingales, October 11, blog post
“Unfortunately, what we’re going to see is a massive amount of regulation attempting to fix the problem and I fear some of it may set up the roots of the next crisis.”
GSB professor Raghuram Rajan, October 22, Reuters article
“[T]here was no financial counterpart to the CIA to aggregate and analyze the information—to assemble a meaningful mosaic from the scattered pieces. ... Companies do not like to broadcast bad news, and speculators planning to sell a company’s stock short do not announce their intentions, as that would drive the stock price down, prematurely from their standpoint.”
Law School senior lecturer Richard Posner, October 12, Becker-Posner blog
“The importance of preventing a banking-sector implosion has long been appreciated not only at Chicago, but also at other leading business schools and economics departments. This is why there has been such strong support for the equity injections from economists with very different political philosophies. It is too early to tell if the enthusiasm will fade once the details become known of how the administration plan is being implemented.”
GSB professors Doug Diamond and Anil Kashyap, October 15, guest “Freakonomics” blog post
“We can largely make up for this delay by extra investment when the banking sector reorganizes itself. Americans waited years during World War II to begin private-sector investment projects (when wartime production displaced private investment), and quickly brought the capital stock (housing and big-ticket consumer items) back to normal levels when the war ended.”
Economics professor Casey B. Mulligan, October 9, New York Times editorial