The Global Financial Crisis
General Director:
Eric Maskin, Harvard University
Co-director:
Eyal Winter, The Hebrew University of Jerusalem
Some observers (mostly outside the economics profession) have suggested that the recent financial crisis constitutes a crisis in economic theory. Standard theory, they maintain, cannot explain how such a crisis could have come about. But, in fact, a large mainstream body of theoretical literature―going back many years―clearly demonstrates how over-leveraging by banks and other financial institutions can lead to just such a collapse. Indeed, the literature demonstrates that there is a natural tendency for these institutions to take this type of risky position and, therefore, that there is a strong case for government to impose leverage limits and minimum capital requirements. It may not be outlandish to claim that the crisis of 2007-9 might have been avoided had this literature been studied and its lessons implemented by policy makers. This year’s Summer School will examine some of the main ideas from the literature.
Speakers:
Markus Brunnermeier, Princeton University
Stanley Fischer, Bank of Israel
John Geanakoplos, Yale University
Mark Gertler, NYU
Bengt Holmstrom, MIT
Ilan Kremer, The Hebrew University of Jerusalem and Stanford University
John Moore, University of Edinburgh and the LSE
Larry Summers, Harvard University
