KABOOM! The Dynamite Prize For Economics Will Go To The 3 Guys Who Blew Up The World

This sounds pretty overdue.

The Real-World Economics Review Blog is taking votes for  The Dynamite Prize in Economics. The prize will be be awarded to the three economists who contributed most to enabling the Global Financial Collapse (GFC), or more figuratively, to the three economists who contributed most to blowing up the global economy.

Click here to vote.

Here’s the list of nominees and explanations for why they were nominated. (via Barry Ritholz)

Go To The Short List of Nominees for the Dynamite Prize in Economics–>
Want to see the list of candidates on one page? Click here.

Fischer Black and Myron Scholes

They jointly developed the Black-Scholes model which led to the explosive growth of financial derivatives. The importance given to their hypothetical calculation of derivative prices was baneful not just because it was bogus, but also because it meant that relevant and often urgent real-world economic research was widely neglected by the profession.

Photo: Myron Scholes

Source: Real World Economics

Eugene Fama

Milton Friedman

He propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modelled using counterfactual propositions about its nature. This, together with his simplistic model of money, encouraged the development of the financial theories with unrealistic assumptions that facilitated the GFC. In short, he opened the door for everyone subsequently to theorize without fear of having to be attached to reality.

Source: Real World Economics

Alan Greenspan

As Chairman of the Federal Reserve System from 1987 to 2006, he both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation. Before a Congressional committee on 28 October 2008 Greenspan confessed that his theoretical beliefs of 40 years were now proven to be without foundation, hence his total confusion and failure at his job.

Source: Real World Economics

Assar Lindbeck

Robert Lucas

Richard Portes

As Secretary-General of the Royal Economic Society from 1992-2008, he helped suppress worries expressed by non-mainstream economists about developments in the financial sector. In 2007 he wrote a Report for the Icelandic Chamber of Commerce giving a clean bill of health to Icelandic banks only a few months before they collapsed. When investigators called attention to the real state of Icelandic banking, he wrote a series of letters to the Financial Times defending the soundness of Icelandic banks and imputing professional incompetence to those who doubted it.

Source: Real World Economics

Edward Prescott and Finn Kydland

Paul Samuelson

Through his textbook Economics: An Introductory Analysis (19 English language editions and translated into 40 languages), he popularised neoclassical economics, contributing more than any other economist to its diffusion and thereby to the deregulation of financial markets which made possible the GFC.

Source: Real World Economics

Larry Summers

As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), he worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking. He also worked with Greenspan and Wall Street interests to torpedo efforts to regulate derivatives.

Source: Real World Economics

OK, It Is Time To Vote

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