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Did anyone notice the global financial crisis of 2007–2008?

By Paul Davidson

On November 4, 2008, at the dedication of a new building, Queen Elizabeth of Great Britain visited the London School of Economics (LSE). While there she was given a briefing by academics at the LSE on the origins and effects of the global financial crisis and its resulting turmoil in international financial markets. The Queen is reported to have asked, “Why did nobody notice it developing?” The director of research at LSE told her, “At every stage someone was relying on somebody else and everyone thought they were doing the right thing.”

How is it possible that the many intelligent investors, bankers, brokers, fund managers and other financial market participants thought they were doing the right thing, when it is clear in hindsight that market activity was creating a situation that ultim- ately caused global financial markets to collapse?

The answer lies in the fact that, for at least four decades, the economic theory that has dominated academic teaching has not been applicable to our economic system.
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Download the rest of the chapter here. It's the first chapter in his new book Post Keynesian Theory and Policy: A Realistic Analysis of the Market Oriented Capitalist Economy.

Comments

  1. Also, every profession (as George Bernard Shaw put it) is a "conspiracy against the public". That is, every profession is a mutual admiration society, arguably more interested in mutual admiration than in solving the world's problems. That's certainly true of the economics profession: possibly less true of other professions.

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