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January 29, 2010

What's going on in Davos this week?

By Cindy Ivanac-Lillig

If you live in the US and are interested in banking issues, this week was jam-packed. We had a highly anticipated State of the Union speech and a new Federal Open Market Committee statement. It was pretty exciting. However, there was one other large event that perhaps wasn't on many folks' radar screens -- the World Economic Forum (WEF) meeting in Davos, Switzerland. The WEF is an organization dedicated to global cooperation and collaboration aimed at solving some of the world's largest economic and social challenges. It is best known for its annual meeting of world leaders in Davos. The articles and speeches that have come out of this year's meeting on the issue of banking regulation were for the most part insightful and framed arguments slightly differently than we may be used to reading.

The head of the IMF, Mr. Strauss-Kahn, affirmed some policy ideas that have come out of the US and UK governments, but warned that if rules are not developed internationally, banking and financial organizations could simply move to places with the least regulation. France's President, Nicolas Sarkozy, called for a financial market transaction tax on banks and went on to point out that diverse accounting rules have helped to protect the status quo. He stated, "If competition is distorted by accounting rules that remain different from one country to another, from one continent to another, market actors will find it hard not to return to precrisis habits."

Although some of the conversation such as the different types of taxes that can be levied on banks is similar to discussions that are going on in our papers, the conference speakers seem to have a broader perspective regarding proposed accounting and regulation reform. It left me wondering what would be most effective -- developing reguation domestically first and then working with the international community to harmonize or just focusing on working with the international community from the beginning to ensure standardization. The latter of which may take some additional time.

Let me know what you and/or your class think about the Davos material....

Here are some links to some of the material that I mentioned here as well a link to the Davos Diary from the International Herald Tribune:

Davos Diary
IMf Chief Urges Coordinated Finance Rules
At Davos, Sarkozy calls for Global Finance Rules

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January 20, 2010

The "Chicago" School Reviewed

By Cindy Ivanac-Lillig

John Cassidy from the New Yorker magazine interviewed a number of well-known economists and asked them what they thought about the beleaguered state of the "Chicago" school of economic thought in light of the crisis. In a nutshell, this school of thought can be described as a deep belief in market efficiency. It has had a lot of offshoots in the last five decades but fundamentally, I think that faith in market efficiency describes the ethos of the movement.

The interviews are wide-ranging and interesting. In his interview, the economist Richard Posner makes the case that perhaps the hyper focus on mathematization and lack of focus on institutional detail has hurt the "Chicago" school. He goes on to explain that it was unclear how much formally trained economists knew about how modern banking and finance worked prior to this crisis! Interesting....no?

For the Posner Interview and more (Thaler, Rajan, Murphy, Heckman, Becker, Cochrane, and Fama), click here. Cassidy also wrote an accompanying piece called, "After the Blowup."

What do you think? Any "Chicago"-ites still standing?

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January 8, 2010

Do you need an excuse to play rap music in an economics class?

By Cindy Ivanac-Lillig

Well, if the answer is yes, here it is -- Economics Rap. PBS put together a fantastic segment that compares the economic philosophies of Keynes and Hayek. It is less than 10 minutes long and is accompanied by a short lesson plan and some discussion ideas. It may elicit some giggling, but it is good stuff and not to mention I bet the students will remember the subject matter for a long time. As always, PBS has done a great job.

Let me know what you think....

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