Dozens of popular accounts blame the current financial crisis on greedy bankers, reckless financial engineers, myopic regulators, or greedy-then-fearful investors. Somehow this misses the obvious point that greed and fear, like myopia and recklessness, have never been in short supply. Ten years ago, and ten centuries ago, they were just as widespread as they are today.
In this lecture I dig deeper, looking for the root causes. Beneath the bad behavior we'll find perverse incentives--incentives that forced good people either to take on excessive risk or else to leave the financial arena. Beneath the perverse incentives we'll find the global sweep of late 20th century finance, reminiscent of the first great globalization a century earlier. And beneath that we'll find. . .
Drawing on my 2008 book, Morals and Markets, I trace financial markets all the way back to our human origins. I show why these markets have become so powerful, and how they grew out
of the imperative to expand trust from family and friends to wider and wider circles. I use cartoons, computer animations, and words (but no equations!) to show how instabilities arise, and to suggest some ways to mitigate future financial disasters.
Monday, February 1, 2010 8 pm
Music Center Recital Hall - West part of campus
Sponsored by: Academic Senate
Contact information for this event:
Senate Office (831) 459-2086
*Email:* tblake@ucsc.edu