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Antecedents to the crisis: Mandeville, Smith, and Keynes

Antecedents to the crisis: Mandeville, Smith, and Keynes The purpose of this paper is to present the methods of teaching about the global financial crisis (GFC) from a social economic perspective. Using primary texts from the history of economic thought, the moral underpinnings for collective social action are examined in times of economic depression. The deregulation of financial markets raises two questions: to what extent is deregulation the result of a misunderstanding about human nature and the behavioral lessons of social economics; and to what extend does deregulation ignore the moral lessons of Adam Smith’s invisible hand?Design/methodology/approachBy reading sources including Mandeville, Smith, Keynes, Hayek and others, students form conclusions about the strengths and weaknesses of government interventions, both to fix, and to prevent, major recessions and depressions.FindingsTwo fallacies relating to financial market deregulation are that “greed is good” and that rational actors in the market will self-regulate leading to widespread prosperity. These moral beliefs supported financial liberalization, and ultimately contributed to financial institutions taking on enormous risks and losses that are ultimately socialized.Originality/valueThis paper innovatively uses readings from the history of economic thought to spark pedagogical discussions and debates about human nature and policymaking relevant to the GFC. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Social Economics Emerald Publishing

Antecedents to the crisis: Mandeville, Smith, and Keynes

Wight, Jonathan B.
International Journal of Social Economics , Volume 46 (8): 13 – Sep 27, 2019
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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0306-8293
DOI
10.1108/ijse-04-2018-0190
Publisher site
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Abstract

The purpose of this paper is to present the methods of teaching about the global financial crisis (GFC) from a social economic perspective. Using primary texts from the history of economic thought, the moral underpinnings for collective social action are examined in times of economic depression. The deregulation of financial markets raises two questions: to what extent is deregulation the result of a misunderstanding about human nature and the behavioral lessons of social economics; and to what extend does deregulation ignore the moral lessons of Adam Smith’s invisible hand?Design/methodology/approachBy reading sources including Mandeville, Smith, Keynes, Hayek and others, students form conclusions about the strengths and weaknesses of government interventions, both to fix, and to prevent, major recessions and depressions.FindingsTwo fallacies relating to financial market deregulation are that “greed is good” and that rational actors in the market will self-regulate leading to widespread prosperity. These moral beliefs supported financial liberalization, and ultimately contributed to financial institutions taking on enormous risks and losses that are ultimately socialized.Originality/valueThis paper innovatively uses readings from the history of economic thought to spark pedagogical discussions and debates about human nature and policymaking relevant to the GFC.

Journal

International Journal of Social Economics – Emerald Publishing

Published: Sep 27, 2019

Keywords: Adam smith; Global financial crisis; Asymmetric information; Moral hazard; Invisible hand; John Maynard Keynes

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