The Financial Crisis: Still Not Caused By Capitalism
James Pethokoukis reports on a new paper that argues against the notion that the financial crisis was caused by income inequality. “Using data from a panel of 14 countries for over 120 years,” the authors of the paper write, “we find strong evidence linking credit booms to banking crises, but no evidence that rising income concentration was a significant determinant of credit booms. Narrative evidence on the US experience in the 1920s, and that of other countries in more recent decades, casts further doubt on the role of rising inequality.” One of the explanations they do find evidence for? The Fed did it.
Meanwhile, Patric H. Hendershott and Kevin Villani investigate “What Made the Financial Crisis Systemic?” Bottom line: “Politicians are responsible for both regulatory incompetence and mission- induced laxity.”
In related news, TARP didn’t work and Dodd-Frank won’t either.
(Usual disclaimers apply: links don’t imply full agreement.)
3 Comments to “The Financial Crisis: Still Not Caused By Capitalism”
Credit exists in a capitalist society with media reporting that credit is being used increasingly for bare essentials even down to a loaf of bread because people do not have a living wage.
Logically if people are using credit to survive than both capitalism as well as wealth inequality is to blame as.
Whilst poverty even exists in a capitalist society whilst there is such a divide between rich and poor the finger will perpetually point to capitalism because it is the foundation of society and all activity within it including credit.
This paper like so many others is whitewashing the issue.
>Credit exists in a capitalist society with media reporting that credit is being used increasingly for bare essentials even down to a loaf of bread because people do not have a living wage.
Now that you’ve discussed “a capitalist society,” perhaps you could discuss America’s mixed economy with its socialist or virtually socialist money and banking. Or you could close your copy of Marx’s _Capital_ and look out your window at the socialist street and the cars with socialist license plates.
Statistics are invalid in the human sciences as they merely identify what happened in some concrete situations, not that they had to happen. They identify coincidences, not causes.
Income inequality is merely the fact that some people are more productive than others. This does not cause economic problems, ie, decreased production. Other than Marxism, there is no rational concern with income inequality. If the maker of my car had my income, he (they) would have been unable to produce my car. And I would be walking or riding a horse. And so for the computer on which I type this. And so for the economics journals in which Marxism is hidden in statistics.