Greenspan wins Dynamite Prize in Economics

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Alan Greenspan has been judged the econ­o­mist most respon­si­ble for caus­ing the Glob­al Finan­cial Cri­sis. He, and 2ndand 3rd place fin­ish­ers Mil­ton Fried­man and Lar­ry Sum­mers, have won the first–and hope­ful­ly last—Dyna­mite Prize in Eco­nom­ics.

In award­ing the Prize, Edward Full­brook, edi­tor of the Real World Eco­nom­ics Review, not­ed that “They have been judged to be the three econ­o­mists most respon­si­ble for the Glob­al Finan­cial Cri­sis. More fig­u­ra­tive­ly, they are the three econ­o­mists most respon­si­ble for blow­ing up the glob­al econ­o­my.”

The prize was devel­oped by the Real World Eco­nom­ics Review Blog in response to attempts by econ­o­mists to evade respon­si­bil­i­ty for the cri­sis by call­ing it an unpre­dictable, “Black Swan” event. In real­i­ty, the pub­lic per­cep­tion that eco­nom­ic the­o­ries and poli­cies helped cause the cri­sis is cor­rect.

The prize win­ners were deter­mined by a poll in which over 7,500 peo­ple voted—most of whom were econ­o­mists them­selves from the 11,000 sub­scribers to the real-world eco­nom­ics review . Each vot­er could vote for a max­i­mum of three econ­o­mists. In total 18,531 votes were cast.

Full­brook cau­tioned that not all eco­nom­ics and econ­o­mists were bad. “Only ‘neo­clas­si­cal’ econ­o­mists caused the GFC. There are oth­er approach­es to eco­nom­ics that are more realistic—or at least less delusional—but these have been sup­pressed in uni­ver­si­ties and exclud­ed from gov­ern­ment pol­i­cy mak­ing.”

Some of these rebels also did what neo­clas­si­cal econ­o­mists false­ly claimed was impos­si­ble: they fore­saw the Glob­al Finan­cial Cri­sis and warned the pub­lic of its approach. In their hon­our, I now call for nom­i­na­tions for the inau­gur­al Revere Award in Eco­nom­ics, named in hon­our of Paul Revere and his famous ride. It will be award­ed to the 3 econ­o­mists who saw the GFC com­ing, and whose work is most like­ly to pre­vent anoth­er GFC in the future.”

Dyna­mite Prize Cita­tions

Alan Greenspan (5,061 votes): As Chair­man of the Fed­er­al Reserve Sys­tem from 1987 to 2006, Alan Greenspan both led the over expan­sion of mon­ey and cred­it that cre­at­ed the bub­ble that burst and aggres­sive­ly pro­mot­ed the view that finan­cial mar­kets are nat­u­ral­ly effi­cient and in no need of reg­u­la­tion.

Mil­ton Fried­man (3,349 votes): Fried­man prop­a­gat­ed the delu­sion, through his mis­un­der­stand­ing of the sci­en­tif­ic method, that an econ­o­my can be accu­rate­ly mod­eled using coun­ter­fac­tu­al propo­si­tions about its nature. This, togeth­er with his sim­plis­tic mod­el of mon­ey, encour­aged the devel­op­ment of fan­ta­sy-based the­o­ries of eco­nom­ics and finance that facil­i­tat­ed the Glob­al Finan­cial Col­lapse.

Lar­ry Sum­mers (3,023 votes): As US Sec­re­tary of the Trea­sury (for­mer­ly an econ­o­mist at Har­vard and the World Bank), Sum­mers worked suc­cess­ful­ly for the repeal of the Glass-Stea­gall Act, which since the Great Crash of 1929 had kept deposit bank­ing sep­a­rate from casi­no bank­ing.  He also helped Greenspan and Wall Street tor­pe­do efforts to reg­u­late deriv­a­tives.

In total 18,531 votes were cast.  The vote totals for the oth­er final­ists were:

Fis­ch­er Black and Myron Scholes 2016
Eugene Fama 1668
Paul Samuel­son 1291
Robert Lucas 912
Richard Portes 433
Edward Prescott and Finn E. Kyd­land 403
Assar Lind­beck 375

The poll was con­duct­ed by Poll­Dad­dy. Cook­ies were used to pre­vent repeat vot­ing.

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