Turkish economist No. 2
For the Turkish economist and Harvard lecturer Dani Rodrik, these days of financial turmoil offer a certain, grim satisfaction. Rodrik is no friend of unfettered markets and he's now putting it up to those who feel that the meltdowns and bailouts and the swinging of the pendulum to over-regulation could seriously harm financial innovation. Here's Rodrik:
"If so, these advocates owe us a bit more detail about the demonstrable benefits of financial innovation. What I would love to hear are some examples such financial innovation — not of any kind, but of the kind that has left a large enough footprint over some kind of economic outcomes we really care about. What are some of the ways in which financial innovation has made our lives measurably and unambiguously better?If I had asked this question a little over a year ago, I suppose I would have been hearing a lot about how collateralized debt obligations and structured finance have allowed millions of people to purchase homes that they would not have been able to afford otherwise. Sorry, but you will have to come up with some other examples now."
Fine. But who was objecting over the past decade about the fact that millions of people were able to "purchase homes that they would not have been able to afford otherwise"? From Spain, to Britain, to Ireland to the next parish on the other side of the Atlantic, the rise in home ownership was seen as making "lives measurably and unambiguously better". The notion of security and prosperity traditionally conferred by home ownership is surely one of the "economic outcomes we really care about", isn't it? Yes, much of all this was built on sand as we now know, but how many economists, Turkish and otherwise, and Harvard lecturers, shouted "Stop!"? Maybe these wizards were so busy turning out and encouraging financial innovators that they failed to notice what their apprentices were up to.
