With the markets melting down, everyone’s looking for someone to blame. Join Hoofy and Boo as they point a few fingers (and hooves) of their own.
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Some of the most serious fallacies of traditional economics have been due to confusion between optimum and equilibrium conditions; the apparent influence of Dr. Pangloss upon the development of economic thought is for the most part nothing but pure intellectual error. —J. R. Hicks, "The rehabilitation of consumers' surplus," Review of Economic Studies 8(2), February 1941, pp. 108-116, footnote 1, p. 112.
I know its late Friday and I'm sorry for the rant but a headline across the tape forced my hand. From a speech on June 25th to the BIS that the Fed officially released today, Fed Vice Chairman Kohn said that "the root cause of our problems was the underpricing of risk as the financial sector interacted with nonfinancial sectors" and that "leverage was a symptom rather than a cause of the underlying crisis." He has a Ph.D and I don't but I want to correct him that easy money policy under Greenspan that had the fed funds rate at...
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