Have policymakers learned from history?

The Corner at National Review Online praises a new paper by Arnold Kling, a member of the Mercatus Center's Financial Markets Working Group about the root causes of the Financial Crisis of 2008. His paper emphasizes that policymakers should learn from history so as not to repeat it:

"The history of past regulatory mistakes suggests that we will not come up with a fool-proof system going forward. In fact, there is a risk of creating a financial system even more dependent on centralized regulation, which could leave it at least as vulnerable to catastrophic failure."

-Arnold Kling, "Not What They Had in Mind: A History of Policies that Produced the Financial Crisis of 2008"

September 14, 2009

Financial Markets, Financial and Monetary, Regulatory Studies Program, Research Papers/Studies, Mercatus, Financial Markets Working Group
Research Papers/Studies

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Summary

This paper looks at the roots of the current crisis through an analytical framework of bad bets, excessive leverage, domino effects, and 21st-century bank runs. It shows that broad policy areas - including housing policy, capital regulations for banks, industry structure and competition, autonomous financial innovation, and monetary policy - affected elements of this framework to varying, but important degrees. Ultimately, this special study seeks to draw meaningful lessons for policymakers by understanding the complex history, evolution, and integrated nature of financial regulations.