Alan Greenspan has been judged the economist most responsible for causing the Global Financial Crisis. He and 2nd and 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.
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): 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): 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||2,016|
|Edward Prescott and Finn E. Kydland||403|
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