北大西洋危机给经济学理论和政策带来的教训
作者：约瑟夫 • 斯蒂格利茨 2013年5月3日
iMFdirect blog home: http://blog-imfdirect.imf.org/
纽约哥伦比亚大学教授，宏观政策再思考 II：最初的举措和早期教训会议的共同主持人
在分析最近的金融危机时，我们多少可以从近几十年的遭遇中获得某些助益。近三十
年来（期间放开政策成为主导）共发生了大约一百次危机，它们为我们提供了丰富的
经验和大量的数据。如果将分析区间扩大到 150 年，则数据更加丰富。
一个半世纪以来一次接一次的危机所提供的详细信息提出了一个急需回答的问题。但
是，这个问题不是“危机是如何发生的？”而是“我们怎么会忽视那么漫长的历史，
以为已经解决了商业周期问题？”认为严重的经济波动已成为过去是这种狂妄自大背
后的主要原因。
市场不稳定、不有效，也不是自我矫正的
此次危机令我们猛醒的一个巨大的教训（我们早就应该明白这一点）是，经济体不一
定是有效、稳定和自我矫正的。
这一迟来的觉醒由两部分组成。其一是注重外生冲击的标准模型。很明显，我们经济
问题的很大一部分是内生的。不仅有短期的内生冲击，也有长期的结构性转型以及持
续性的冲击。那些注重外生冲击的模型误导了我们，大部分非常大的冲击都源自于经
济体内部。
其二，经济体不能自我矫正。很明显，我们还没有吃透从这次危机中得到的关键教训，
即使在危机过后，欧美各国缩手缩脚的修复经济的努力都失败了。各国显然做得不够。
其结果是，我们继续面临未来再度发生危机的重大风险。
此外，回应危机的努力远未使各国经济体回到充分就业状态。潜在和实际 GDP 之间的
差距有几万亿美元之巨。
当然，有些人会说结果可能会更糟，这话不错。那些负责解决危机的人中，有些人原
本就是危机的制造者。从这个角度来看，没有发生更大的灾难也许还是一件了不起的
事情。
比去杠杆化和资产负债表危机更重要的是：必须进行结构转型
从人力资源、资本储备和自然资源来看，我们今天基本处于危机前的水平。与此同时，
许多国家的 GDP 尚未恢复到危机前的水平，更不要说回到危机前的增长路径。从根本
意义上来说，危机尚未得到全面的解决，没有一种好的经济理论能够解释为什么会这
样。
其中部分原因在于去杠杆化进程缓慢。但是，即使经济在降低杠杆率，完全有理由相
信不会回复充分就业。我们不太可能回到危机前家庭储蓄率为零的状态，真的发生这
种情况也不是好事。即使制造业稍许复苏，这一部门已经失去的就业机会也不会失而
复得。
有些人认为，从以往数据来看，我们对这种不幸的状况无能为力。经历严重金融危机
的经济体一般复苏缓慢。但是，虽然金融危机之后往往会出问题并不意味着一定会出
问题。
这不仅仅是资产负债表危机。一个更加深层的原因是：欧美各国正经历着一场结构性
的转型。与这一结构型转型相关联的是从制造业经济向服务业经济的转变。此外，比
较优势的变化要求北大西洋国家的结构发生重大调整。
改革充其量只触及了皮毛
市场自身一般不会带来有效、稳定和为社会所接受的结果。这意味着，我们必须更加
深刻地思考：什么样的经济结构能够带来增长、真正的稳定以及良好的收入分配。
目前一直在进行的辩论是，我们应该只是对现有的经济结构进行微调，还是必须进行
根本性的改革。我有两项担忧。一项是先前已经暗示过的：迄今为止的改革只触及皮
毛。其次是，（危机前后）进行的一些意在改善经济表现的改革可能并未取得成功。
比方说，有些改革可能使得经济能够更好地抵御小冲击，但是实际上却使得经济承受
大冲击的能力降低。金融部门的许多整合都是这样，虽然使得经济能够承受一些较小
的冲击，但显然使得经济抵御更大的肥尾冲击的能力下降。
很清楚，危机前市场的许多“改善”实际上增加了各国的风险敞口。资本和金融市场
放开可能带来的任何（可疑的）好处，都具有增加风险的巨大成本。我们必须重新思
考对这类改革的态度，基金组织近年来的反思值得称赞。各种形式的资本账户管理的
目标之一，是降低一个国家因国际交往而产生的国内波动性。
更广义而言，这场危机使得人们认识到保持宏观稳定的金融监管的重要性。但是我在
评估危机后事件时感到失望。危机后发生的兼并使得银行大到不能倒的问题更加严重。
但是，问题不仅在于那些大到不能倒的银行。有些银行因彼此盘根错节而不能倒，有
些银行则是因相互关联而不能倒。我们在这方面无所作为。当然，对大到不能倒的问
题已经展开了大量的讨论。但是，过度关联是一个独特的问题。金融机构的生态很有
必要多样化，降低过度关联的冲动，从而增加稳定性。这种观点还远未得到足够的重
视。
此外，我们在增加银行资本要求方面做得也不够。大量讨论都缺乏对于提高资本要求
的成本和益处的评估。我们知道其益处——降低需要政府救助以及 2007 年和 2008 年
事件复发的风险。但在成本方面，我们对于 Modigliani-Miller 定理的根本性洞见不够重
视，这项定理解释了为什么所谓增加资本要求将提高资本成本的说法是谬论。
改革和模型存在的缺陷
如果我们在改革之初将重点放在如何使经济更加有效和稳定，那么我们自然会提出另
外一些问题。有趣的是，在改革的缺陷与经济学家们经常运用的宏观经济学模型缺陷
之间存在某种相关性。
信用的重要性
例如，我们会问金融部门的根本作用是什么，以及如何使之更好地发挥这些作用。显
然，这些关键的作用之一是资本配置和提供信用，尤其是向中小型企业提供信用。金
融部门在危机前没有很好地发挥这一功能，而且可以说至今任然没有做好。
这一点似乎很明显。无论是政策文件还是标准宏观模型，都没有注重信用的提供。我
们必须将重点从资金转向信用。任何资产负债表的两边通常都是高度关联的，但现实
并非总是如此，尤其在出现大幅经济动荡时。在这种时刻，我们必须将重点放在信用
上。标准宏观模型对于信用机制的本质缺乏适当研究，其缺乏程度非同寻常。当然，
关于银行业务与信用的微观经济学文献汗牛充栋，但总的来说，这些文献中的见解并
未纳入标准宏观经济模型。
但是，我们做法的缺陷不仅在于管理信用，还在于对不同融资类型缺乏理解。在分析
金融市场风险中，一个重要的方面是债务与股权的区别。在标准宏观经济学当中，我
们很少关注这个问题。我与 Bruce Greenwald 合著的《论货币经济学新范式》（剑桥大
学出版社 2003 年版）一书试图弥补这一不足。
稳定
如上所述，根据常规模型（以及常识），市场经济是稳定的。因此，毫不奇怪，人们
很少问应该如何设计更加稳定的经济体系。我们已经谈到了几个方面：如何设计风险
较小或自身波动性较小的经济体系。
一个有必要但没有得到足够重视的改革是，必须建立更多的自动稳定器，减少自动失
稳器。不仅在金融部门，而且在整个经济当中都要这样。比如说，从固定福利体系向
固定缴款体系过渡可能使得经济更加不稳定。
我在别处曾经解释过，风险分担安排（尤其是设计欠佳时）实际上可能增加系统性风
险：危机前一般认为多样化基本上消除了风险的看法是错误的。我在这篇文章、此篇
论文和本篇文章中对此做了详细的分析。
分布
分布也是重要的—在个人、家庭和企业之间、家庭之间以及企业当中的分布。传统上
讲，宏观经济学注重某些总量，如杠杆与 GDP 的平均比率。但是，这一数字和其他平
均数字往往不能展示一个经济体的脆弱性。
在本次金融危机中，这些数字没有提供预警信号。实际上，大量底层人群无法按期偿
债这一事实，原本应该让我们发觉出了问题。
我们所有的模型都有必要具备一种对于异质性及其对经济稳定的启示的理解。
政策框架
有缺陷的模型不仅导致错误的政策，而且也导致错误的政策框架。
货币政策应该仅仅注重短期利率吗？
在货币政策中，人们倾向于认为，央行只能通过设定短期利率进行干预。他们认为，
“单项干预”优于多项干预。自从八十年以前 Ramsey 的工作发表以来，我们知道集中
于一项工具一般说来不是最好的方法。
主张“单一干预”的人认为这是最佳的方法，因为它对于经济的扭曲最小。当然，我
们之所以有货币政策（也就是政府为什么干预经济的原因），就是因为我们不相信市
场自身能够设定正确的短期利率。如果我们相信的话，就会让自由市场来决定利率了。
一件奇怪的事是，虽然几乎每家央行都会同意应该干预利率的定价，却不是所有人都
相信我们应该对其他事情进行战略性干预，尽管有关税收和市场干预的一般理论告诉
我们，仅仅干预一种价格并不是最优的做法。
一旦我们将分析的重点转移到信用，并明确地将风险纳入分析之中，我们就认识到有
必要运用多种工具。事实上，我们应该运用所有可支配的工具。货币经济学家往往在
宏观审慎、微观审慎和常规货币政策工具之间加以分界。我和 Bruce Greenwald 在合著
的《论货币经济学新范式》一书中认为，这一分界是人为的。政府应该以协调的方式，
调动所有工具（我回头再来讨论这个问题）。
当然，我们不可能“纠正”每一次市场失灵。但是，我们必须总是干预那些很大的宏
观经济失灵。Bruce Greenwald 和我指出，如果存在信息不完美或不对称，或风险市场
不完美，那么市场效率就永远不会是帕累托最优。因为这些状态永远存在，市场效率
永远不会达到帕累托最优。最近的研究昭示了这些以及其他相关制约因素对于宏观经济的重要性，不过，这些重要研究工作的洞见还没有被适当地纳入主流宏观经济模型
或宏观经济政策的讨论中去。
是价格，还是量化干预
这些理论上的洞见也有助于我们理解，为什么一些经济学家关于价格干预优于量化干
预的陈旧假设是错误的。在很多情况下，量化干预带来更好的经济表现。
廷伯根
在某些范围内变得比较流行的一种政策框架认为，只要工具和目标的数量匹配，经济
体系就是可控的，在这种情况下，管理经济的最佳方法是由一个机构负责一个目标和
一个工具。（根据这种观点，央行具备一项工具，即利率，有一个目标，即通货膨胀。
我们已经解释了为什么将货币政策局限于一项工具是错误的。）
作这样的划分从一个机构或官僚机构的角度来看是有利的，但从管理宏观经济政策
（在充满不确定性的世界中注重增长、稳定和分配）的角度来讲，这种划分毫无道理。
必须在各项问题之间进行协调，并且协调所有的可支配工具。货币政策和财政政策之
间必须密切协调。当不同人控制不同工具并着重不同目标时，所产生的自然均衡，一
般来说远远不是实现社会整体目标的最优状态。改善协调以及工具的运用则能够加强
经济的稳定。
抓住机遇，改造有缺陷的模型
应该明确的是，我们原本可以更有所作为地防止这次危机的发生并减轻其影响。而且
还应该明确一点，我们应该能够为避免下一次危机更有所作为。通过这次以及其他类
似的会议，我们至少已经开始明确地指出那些很大的市场失灵，大的宏观经济外部性，
以及实现高增长、增强稳定和改善收入分配的更好的政策干预方式。
要获得成功，我们必须提醒自己，市场自身不能解决这些问题，仅靠短期利率这样的
单一干预也不行。这是过去一个半世纪以来已经被反复证明的事实。
尽管我们面临的经济问题十分严峻，认识到这些问题可以使我们利用这一严重经济创
伤时期带来的重大机遇，即，抓住机遇，改造有缺陷的模型，我们甚至可以走出这一
漫长的危机周期。
The Lessons of the North Atlantic Crisis for Economic Theory and Policy
Joseph E. Stiglitz May 3, 2013
In analyzing the most recent financial crisis, we can benefit somewhat from the misfortune of recent decades. The approximately 100 crises that have occurred during the last 30 years—as liberalization policies became dominant—have given us a wealth of experience and mountains of data. If we look over a 150 year period, we have an even richer data set.
With a century and half of clear, detailed information on crisis after crisis, the burning question is not How did this happen? but How did we ignore that long history, and think that we had solved the problems with the business cycle? Believing that we had made big economic fluctuations a thing of the past took a remarkable amount of hubris.
Markets are not stable, efficient, or self-correcting
The big lesson that this crisis forcibly brought home—one we should have long known—is that economies are not necessarily efficient, stable or self-correcting.
There are two parts to this belated revelation. One is that standard models had focused on exogenous shocks, and yet it's very clear that a very large fraction of the perturbations to our economy are endogenous. There are not only short?run endogenous shocks; there are long?run structural transformations and persistent shocks. The models that focused on exogenous shocks simply misled us—the majority of the really big shocks come from within the economy.
Secondly, economies are not self-correcting. It’s clear that we have yet to fully take on aboard this crucial lesson that we should have learned from this crisis: even in its aftermath, the tepid attempts to fix the economies of the United States and Europe have been a failure. They certainly have not gone far enough. The result is that we continue to face significant risks of another crisis in the future.
So too, the responses to the crisis have not brought our economies anywhere near back to full employment. The loss in GDP between our potential and our actual output is in the trillions of dollars.
Of course, some will say that it could have been done worse, and that’s true. Considering that the people in charge of fixing the crisis included some of the same ones who created it in the first place, it is perhaps remarkable it hasn’t been a bigger catastrophe.
More than deleveraging, more than a balance sheet crisis: the need for structural transformation
In terms of human resources, capital stock, and natural resources, we’re roughly at the same levels today that we were before the crisis. Meanwhile, many countries have not regained their pre-crisis GDP levels, to say nothing of a return to the pre-crisis growth paths. In a very fundamental sense, the crisis is still not fully resolved—and there's no good economic theory that explains why that should be the case.
Some of this has to do with the issue of the slow pace of deleveraging. But even as the economy deleverages, there is every reason to believe that it will not return to full employment. We are not likely to return to the pre-crisis household savings rate of zero—nor would it be a good thing if we did. Even if manufacturing has a slight recovery, most of the jobs that have been lost in that sector will not be regained.
Some have suggested that, looking at past data, we should resign ourselves to this unfortunate state of affairs. Economies that have had severe financial crises typically recover slowly. But the fact that things have often gone badly in the aftermath of a financial crisis doesn't mean they must go badly.
This is more than just a balance sheet crisis. There is a deeper cause: The United States and Europe are going through a structural transformation. There is a structural transformation associated with the move from manufacturing to a service sector economy. Additionally, changing comparative advantages requires massive adjustments in the structure of the North Atlantic countries.
Reforms that are, at best, half-way measures
Markets by themselves do not in general lead to efficient, stable and socially acceptable outcomes. This means we have to think a little bit more deeply about what kind of economic architectures will lead to growth, real stability, and a good distribution of income.
There is an ongoing debate about whether we simply need to tweak the existing economic architecture or whether we need to make more fundamental changes. I have two concerns. One I hinted at earlier: the reforms undertaken so far have only tinkered at the edges. The second is that some of the changes in our economic structure (both before and after the crisis) that were supposed to make the economy perform better may not have done so.
There are some reforms, for instance, that may enable the economy to better withstand small shocks, but actually make it less able to absorb big shocks. This is true of much of the financial sector integration that may have allowed the economy to absorb some of the smaller shocks, but clearly made the economy less resilient to fatter?tail shocks.
It should be clear that many of the "improvements" in markets before the crisis actually increased countries' exposure to risk. Whatever the benefits that might be derived from capital and financial market liberalization (and they are questionable), there have been severe costs in terms of increased risk. We ought to be rethinking attitudes towards these reforms—and the IMF should be commended for its rethinking in recent years. One of the objectives of capital account management, in all of its forms, can be to reduce domestic volatility arising from a country's international engagements.
More generally, the crisis has brought home the importance of financial regulation for macroeconomic stability. But as I assess what has happened since the crisis, I feel disappointed. With the mergers that have occurred in the aftermath of the crisis, the problem of too-big-to- fail banks has become even worse. But the problem is not just with too-big-to-fail banks. There are banks that are too intertwined to fail and banks that are too correlated to fail. We have done little about any of these issues. There has, of course, been a huge amount of discussion about too- big-to-fail. But being too correlated is a distinct issue. There is a strong need for a more diversified ecology of financial institutions that would reduce incentives to be excessively correlated and lead to greater stability. This is a perspective that has not been emphasized nearly enough.
Also, we haven't done enough to increase bank capital requirements. Missing in much of the discussion is an assessment of the costs vs. benefits of higher capital requirements. We know the benefits—a lower risk of a government bailout and a recurrence of the kinds of events that marked 2007 and 2008. But on the cost side, we’ve paid too little attention to the fundamental insights of the Modigliani?Miller Theorem, which explains the bogusness of arguments that increasing capital requirements will increase the cost of capital.
Deficiencies in reforms and in modeling
If we had begun our reform efforts with a focus on how to make our economy more efficient and more stable, there are other questions we would have naturally asked; other questions we would have posed. Interestingly, there is some correspondence between these deficiencies in our reform efforts and the deficiencies in the models that we as economists often use in macroeconomics.
The importance of credit
We would, for instance, have asked what the fundamental roles of the financial sector are, and how we can get it to perform those roles better. Clearly, one of the key roles is the allocation of capital and the provision of credit, especially to small and medium-sized enterprises, a function which it did not perform well before the crisis, and which arguably it is still not fulfilling well.
This might seem obvious. But a focus on the provision of credit has neither been at the center of policy discourse nor of the standard macro-models. We have to shift our focus from money to credit. In any balance sheet, the two sides are usually going to be very highly correlated. But that is not always the case, particularly in the context of large economic perturbations. In these, we ought to be focusing on credit. I find it remarkable the extent to which there has been an inadequate examination in standard macro models of the nature of the credit mechanism. There is, of course, a large microeconomic literature on banking and credit, but for the most part, the insights of this literature has not been taken on board in standard macro-models.
But failing to manage credit is not the only lacuna in our approach. There is also a lack of understanding of different kinds of finance. A major area in the analysis of risk in financial markets is the difference between debt and equity. And in standard macroeconomics, we have barely given this any attention. My book with Bruce Greenwald, Towards a New Paradigm of Monetary Economics ((Cambridge University Press, 2003) was an attempt to remedy this.
Stability
As I have already noted, in the conventional models (and in the conventional wisdom) market economies were stable. And so it was perhaps not a surprise that fundamental questions about how to design more stable economic systems were seldom asked. We have already touched on several aspects of this: how to design economic systems that are less exposed to risk or that generate less volatility on their own.
One of the necessary reforms, but one not emphasized enough, is the need for more automatic stabilizers and fewer automatic destabilizers—not only in the financial sector, but throughout the economy. For instance, the movement from defined benefit to defined contribution systems may have led to a less stable economy.
Elsewhere, I have explained how risk sharing arrangements (especially if poorly designed) can actually lead to more systemic risk: the pre-crisis conventional wisdom that diversification essentially eliminates risk is just wrong. I’ve explored this is some detail in this article, along with this paper and this one.
Distribution
Distribution matters as well—distribution among individuals, between households and firms, among households, and among firms. Traditionally, macroeconomics focused on certain aggregates, such as the average ratio of leverage to GDP. But that and other average numbers often don't give a picture of the vulnerability of the economy.
In the case of the financial crisis, such numbers didn’t give us warning signs. Yet it was the fact that a large number of people at the bottom couldn't make their debt payments that should have tipped us off that something was wrong.
Across the board, our models need to incorporate a greater understanding of heterogeneity and its implications for economic stability.
Policy Frameworks
Flawed models not only lead to flawed policies, but also to flawed policy frameworks.
Should monetary policy focus just on short term interest rates?
In monetary policy, there is a tendency to think that the central bank should only intervene in the setting of the short-term interest rate. They believe "one intervention" is better than many. Since at least 80 years ago with the work of Ramsey we know that focusing on a single instrument is not generally the best approach.
The advocates of the "single intervention" approach argue that it is best, because it least distorts the economy. Of course, the reason we have monetary policy in the first place—the reason why government acts to intervene in the economy—is that we don't believe that markets on their own will set the right short-term interest rate. If we did, we would just let free markets determine that interest rate. The odd thing is that while just about every central banker would agree we should intervene in the determination of that price, not everyone is so convinced that we should strategically intervene in others, even though we know from the general theory of taxation and the general theory of market intervention that intervening in just one price is not optimal.
Once we shift the focus of our analysis to credit, and explicitly introduce risk into the analysis, we become aware that we need to use multiple instruments. Indeed, in general, we want to use all the instruments at our disposal. Monetary economists often draw a division between macro-prudential, micro-prudential, and conventional monetary policy instruments. In our book Towards a New Paradigm in Monetary Economics, Bruce Greenwald and I argue that this distinction is artificial. The government needs to draw upon all of these instruments, in a coordinated way. (I'll return to this point shortly.)
Of course, we cannot "correct" every market failure. The very large ones, however—the macroeconomic failures—will always require our intervention. Bruce Greenwald and I have pointed out that markets are never Pareto efficient if information is imperfect, if there are asymmetries of information, or if risk markets are imperfect. And since these conditions are always satisfied, markets are never Pareto efficient. Recent research has highlighted the importance of these and other related constraints for macroeconomics—though again, the insights of this important work have yet to be adequately integrated either into mainstream macroeconomic models or into mainstream policy discussions.
Price versus quantitative interventions
These theoretical insights also help us to understand why the old presumption among some economists that price interventions are preferable to quantity interventions is wrong. There are many circumstances in which quantity interventions lead to better economic performance.
Tinbergen
A policy framework that has become popular in some circles argues that so long as there are as many instruments as there are objectives, the economic system is controllable, and the best way of managing the economy in such circumstances is to have an institution responsible for one target and one instrument. (In this view, central banks have one instrument—the interest rate—and one objective—inflation. We have already explained why limiting monetary policy to one instrument is wrong.)
Drawing such a division may have advantages from an agency or bureaucratic perspective, but from the point of view of managing macroeconomic policy—focusing on growth, stability and distribution, in a world of uncertainty—it makes no sense. There has to be coordination across all the issues and among all the instruments that are at our disposal. There needs to be close coordination between monetary and fiscal policy. The natural equilibrium that would arise out of having different people controlling different instruments and focusing on different objectives is, in general, not anywhere near what is optimal in achieving overall societal objectives. Better coordination—and the use of more instruments—-can, for instance, enhance economic stability.
Take this chance to revolutionize flawed models
It should be clear that we could have done much more to prevent this crisis and to mitigate its effects. It should be clear too that we can do much more to prevent the next one. Still, through this conference and others like it, we are at least beginning to clearly identify the really big market failures, the big macroeconomic externalities, and the best policy interventions for achieving high growth, greater stability, and a better distribution of income.
To succeed, we must constantly remind ourselves that markets on their own are not going to solve these problems, and neither will a single intervention like short-term interest rates. Those facts have been proven time and again over the last century and a half.
And as daunting as the economic problems we now face are, acknowledging this will allow us to take advantage of the one big opportunity this period of economic trauma has afforded: namely, the chance to revolutionize our flawed models, and perhaps even exit from an interminable cycle of crises.
Markets are not stable, efficient, or self-correcting
The big lesson that this crisis forcibly brought home—one we should have long known—is that economies are not necessarily efficient, stable or self-correcting.
There are two parts to this belated revelation. One is that standard models had focused on exogenous shocks, and yet it's very clear that a very large fraction of the perturbations to our economy are endogenous. There are not only short?run endogenous shocks; there are long?run structural transformations and persistent shocks. The models that focused on exogenous shocks simply misled us—the majority of the really big shocks come from within the economy.
Secondly, economies are not self-correcting. It’s clear that we have yet to fully take on aboard this crucial lesson that we should have learned from this crisis: even in its aftermath, the tepid attempts to fix the economies of the United States and Europe have been a failure. They certainly have not gone far enough. The result is that we continue to face significant risks of another crisis in the future.
So too, the responses to the crisis have not brought our economies anywhere near back to full employment. The loss in GDP between our potential and our actual output is in the trillions of dollars.
Of course, some will say that it could have been done worse, and that’s true. Considering that the people in charge of fixing the crisis included some of the same ones who created it in the first place, it is perhaps remarkable it hasn’t been a bigger catastrophe.
More than deleveraging, more than a balance sheet crisis: the need for structural transformation
In terms of human resources, capital stock, and natural resources, we’re roughly at the same levels today that we were before the crisis. Meanwhile, many countries have not regained their pre-crisis GDP levels, to say nothing of a return to the pre-crisis growth paths. In a very fundamental sense, the crisis is still not fully resolved—and there's no good economic theory that explains why that should be the case.
Some of this has to do with the issue of the slow pace of deleveraging. But even as the economy deleverages, there is every reason to believe that it will not return to full employment. We are not likely to return to the pre-crisis household savings rate of zero—nor would it be a good thing if we did. Even if manufacturing has a slight recovery, most of the jobs that have been lost in that sector will not be regained.
Some have suggested that, looking at past data, we should resign ourselves to this unfortunate state of affairs. Economies that have had severe financial crises typically recover slowly. But the fact that things have often gone badly in the aftermath of a financial crisis doesn't mean they must go badly.
This is more than just a balance sheet crisis. There is a deeper cause: The United States and Europe are going through a structural transformation. There is a structural transformation associated with the move from manufacturing to a service sector economy. Additionally, changing comparative advantages requires massive adjustments in the structure of the North Atlantic countries.
Reforms that are, at best, half-way measures
Markets by themselves do not in general lead to efficient, stable and socially acceptable outcomes. This means we have to think a little bit more deeply about what kind of economic architectures will lead to growth, real stability, and a good distribution of income.
There is an ongoing debate about whether we simply need to tweak the existing economic architecture or whether we need to make more fundamental changes. I have two concerns. One I hinted at earlier: the reforms undertaken so far have only tinkered at the edges. The second is that some of the changes in our economic structure (both before and after the crisis) that were supposed to make the economy perform better may not have done so.
There are some reforms, for instance, that may enable the economy to better withstand small shocks, but actually make it less able to absorb big shocks. This is true of much of the financial sector integration that may have allowed the economy to absorb some of the smaller shocks, but clearly made the economy less resilient to fatter?tail shocks.
It should be clear that many of the "improvements" in markets before the crisis actually increased countries' exposure to risk. Whatever the benefits that might be derived from capital and financial market liberalization (and they are questionable), there have been severe costs in terms of increased risk. We ought to be rethinking attitudes towards these reforms—and the IMF should be commended for its rethinking in recent years. One of the objectives of capital account management, in all of its forms, can be to reduce domestic volatility arising from a country's international engagements.
More generally, the crisis has brought home the importance of financial regulation for macroeconomic stability. But as I assess what has happened since the crisis, I feel disappointed. With the mergers that have occurred in the aftermath of the crisis, the problem of too-big-to- fail banks has become even worse. But the problem is not just with too-big-to-fail banks. There are banks that are too intertwined to fail and banks that are too correlated to fail. We have done little about any of these issues. There has, of course, been a huge amount of discussion about too- big-to-fail. But being too correlated is a distinct issue. There is a strong need for a more diversified ecology of financial institutions that would reduce incentives to be excessively correlated and lead to greater stability. This is a perspective that has not been emphasized nearly enough.
Also, we haven't done enough to increase bank capital requirements. Missing in much of the discussion is an assessment of the costs vs. benefits of higher capital requirements. We know the benefits—a lower risk of a government bailout and a recurrence of the kinds of events that marked 2007 and 2008. But on the cost side, we’ve paid too little attention to the fundamental insights of the Modigliani?Miller Theorem, which explains the bogusness of arguments that increasing capital requirements will increase the cost of capital.
Deficiencies in reforms and in modeling
If we had begun our reform efforts with a focus on how to make our economy more efficient and more stable, there are other questions we would have naturally asked; other questions we would have posed. Interestingly, there is some correspondence between these deficiencies in our reform efforts and the deficiencies in the models that we as economists often use in macroeconomics.
The importance of credit
We would, for instance, have asked what the fundamental roles of the financial sector are, and how we can get it to perform those roles better. Clearly, one of the key roles is the allocation of capital and the provision of credit, especially to small and medium-sized enterprises, a function which it did not perform well before the crisis, and which arguably it is still not fulfilling well.
This might seem obvious. But a focus on the provision of credit has neither been at the center of policy discourse nor of the standard macro-models. We have to shift our focus from money to credit. In any balance sheet, the two sides are usually going to be very highly correlated. But that is not always the case, particularly in the context of large economic perturbations. In these, we ought to be focusing on credit. I find it remarkable the extent to which there has been an inadequate examination in standard macro models of the nature of the credit mechanism. There is, of course, a large microeconomic literature on banking and credit, but for the most part, the insights of this literature has not been taken on board in standard macro-models.
But failing to manage credit is not the only lacuna in our approach. There is also a lack of understanding of different kinds of finance. A major area in the analysis of risk in financial markets is the difference between debt and equity. And in standard macroeconomics, we have barely given this any attention. My book with Bruce Greenwald, Towards a New Paradigm of Monetary Economics ((Cambridge University Press, 2003) was an attempt to remedy this.
Stability
As I have already noted, in the conventional models (and in the conventional wisdom) market economies were stable. And so it was perhaps not a surprise that fundamental questions about how to design more stable economic systems were seldom asked. We have already touched on several aspects of this: how to design economic systems that are less exposed to risk or that generate less volatility on their own.
One of the necessary reforms, but one not emphasized enough, is the need for more automatic stabilizers and fewer automatic destabilizers—not only in the financial sector, but throughout the economy. For instance, the movement from defined benefit to defined contribution systems may have led to a less stable economy.
Elsewhere, I have explained how risk sharing arrangements (especially if poorly designed) can actually lead to more systemic risk: the pre-crisis conventional wisdom that diversification essentially eliminates risk is just wrong. I’ve explored this is some detail in this article, along with this paper and this one.
Distribution
Distribution matters as well—distribution among individuals, between households and firms, among households, and among firms. Traditionally, macroeconomics focused on certain aggregates, such as the average ratio of leverage to GDP. But that and other average numbers often don't give a picture of the vulnerability of the economy.
In the case of the financial crisis, such numbers didn’t give us warning signs. Yet it was the fact that a large number of people at the bottom couldn't make their debt payments that should have tipped us off that something was wrong.
Across the board, our models need to incorporate a greater understanding of heterogeneity and its implications for economic stability.
Policy Frameworks
Flawed models not only lead to flawed policies, but also to flawed policy frameworks.
Should monetary policy focus just on short term interest rates?
In monetary policy, there is a tendency to think that the central bank should only intervene in the setting of the short-term interest rate. They believe "one intervention" is better than many. Since at least 80 years ago with the work of Ramsey we know that focusing on a single instrument is not generally the best approach.
The advocates of the "single intervention" approach argue that it is best, because it least distorts the economy. Of course, the reason we have monetary policy in the first place—the reason why government acts to intervene in the economy—is that we don't believe that markets on their own will set the right short-term interest rate. If we did, we would just let free markets determine that interest rate. The odd thing is that while just about every central banker would agree we should intervene in the determination of that price, not everyone is so convinced that we should strategically intervene in others, even though we know from the general theory of taxation and the general theory of market intervention that intervening in just one price is not optimal.
Once we shift the focus of our analysis to credit, and explicitly introduce risk into the analysis, we become aware that we need to use multiple instruments. Indeed, in general, we want to use all the instruments at our disposal. Monetary economists often draw a division between macro-prudential, micro-prudential, and conventional monetary policy instruments. In our book Towards a New Paradigm in Monetary Economics, Bruce Greenwald and I argue that this distinction is artificial. The government needs to draw upon all of these instruments, in a coordinated way. (I'll return to this point shortly.)
Of course, we cannot "correct" every market failure. The very large ones, however—the macroeconomic failures—will always require our intervention. Bruce Greenwald and I have pointed out that markets are never Pareto efficient if information is imperfect, if there are asymmetries of information, or if risk markets are imperfect. And since these conditions are always satisfied, markets are never Pareto efficient. Recent research has highlighted the importance of these and other related constraints for macroeconomics—though again, the insights of this important work have yet to be adequately integrated either into mainstream macroeconomic models or into mainstream policy discussions.
Price versus quantitative interventions
These theoretical insights also help us to understand why the old presumption among some economists that price interventions are preferable to quantity interventions is wrong. There are many circumstances in which quantity interventions lead to better economic performance.
Tinbergen
A policy framework that has become popular in some circles argues that so long as there are as many instruments as there are objectives, the economic system is controllable, and the best way of managing the economy in such circumstances is to have an institution responsible for one target and one instrument. (In this view, central banks have one instrument—the interest rate—and one objective—inflation. We have already explained why limiting monetary policy to one instrument is wrong.)
Drawing such a division may have advantages from an agency or bureaucratic perspective, but from the point of view of managing macroeconomic policy—focusing on growth, stability and distribution, in a world of uncertainty—it makes no sense. There has to be coordination across all the issues and among all the instruments that are at our disposal. There needs to be close coordination between monetary and fiscal policy. The natural equilibrium that would arise out of having different people controlling different instruments and focusing on different objectives is, in general, not anywhere near what is optimal in achieving overall societal objectives. Better coordination—and the use of more instruments—-can, for instance, enhance economic stability.
Take this chance to revolutionize flawed models
It should be clear that we could have done much more to prevent this crisis and to mitigate its effects. It should be clear too that we can do much more to prevent the next one. Still, through this conference and others like it, we are at least beginning to clearly identify the really big market failures, the big macroeconomic externalities, and the best policy interventions for achieving high growth, greater stability, and a better distribution of income.
To succeed, we must constantly remind ourselves that markets on their own are not going to solve these problems, and neither will a single intervention like short-term interest rates. Those facts have been proven time and again over the last century and a half.
And as daunting as the economic problems we now face are, acknowledging this will allow us to take advantage of the one big opportunity this period of economic trauma has afforded: namely, the chance to revolutionize our flawed models, and perhaps even exit from an interminable cycle of crises.
