Ethics of the Capitalism
You must cite at least five sources. I do not care how you cite them; just cite them in a way that I can find your sources if I have to.
Write an essay explaining and defending your answer to the following question: What, if anything, does the 2008 financial crisis show about the ethics of the capitalism? First, briefly explain your understanding of what happened that led to the subprime mortgage collapse and ensuing financial crisis of 2008. In your opinion, what caused all this? Consider multiple possible hypotheses, and explain and defend why your explanation is a better hypothesis than the other ones.
Next, explain what you think this explanation of the crisis tells us about the ethics of the economic system of capitalism. Should we blame the free market for the collapse? Or should we blame too much government regulation? Or is something else to blame? Be sure to fully defend your opinions. This paper requires some research. That is, in answering your question, you should try your best to figure out what actually happened to cause the 2008 financial crisis. This will be difficult, since there are several competing hypotheses that various experts and non-experts endorse. You should do your best to become familiar with these various proposed explanations. (As stated above, for this paper you must provide citations of at least five sources… and I recommend researching and using a lot more than that!) To get you started, I have provided several links to articles on the course blog:
In addition to your research, though, I want you to demonstrate your critical thinking abilities. Don’t simply accept someone’s theory because it’s published in a fancy newspaper or magazine. Evaluate the reasons they offer in support of their proposed explanation. Choose the explanation that you think is most likely to be true given the evidence at your disposal, and defend your choice.
Here are some links to get you started.
What happened? Explainers:
- A brief explanation and how it spread (Economics Help blog)
- The subprime mortgage crisis (This American Life)
- Law professor Michael Greenberger’s explanation of the mortgage crisis (Fresh Air)
- The larger financial fallout from the mortgage crisis (This American Life)
- Greenberger’s explanation of the fallout (Fresh Air)
- Why Lehman Brother’s failure hurt so much (Slate)
- The financial crisis: a play in 6.5 acts
What caused the crisis? Hypotheses and rebuttals:
- DEREGULATION THEORIES
- Too much trust in free markets! (economist Paul Krugman) …economist David Levine’s response to Krugman
- I used to trust free markets, but now I don’t (judge Richard Posner) …an interview with Posner
- Blame free market capitalism! (Slate)
- Blame Reagan’s deregulation! (journalist Jeff Madrick)
- We need more regulation! (economist Robert Pollin)
FREE MARKET THEORIES
- It wasn’t deregulation, it was bad regulation (historian Niall Ferguson)
- Too much trust in economist’s formal models! (economist David Colander)
- Poor corporate governance & too much reliance on ratings agencies! (historian Charles Calomiris)
- It wasn’t irrationality, or bonuses, or capitalism… it was regulation! (political scientist Jeffrey Friedman)
- So many myths, but the real story is regulation! (economist Arnold Kling)
- Debate: Wall Street vs. Government (various)
- Overconfidence! (journalist Malcolm Gladwell) …more thoughts on the ‘Overconfidence!’ hypothesis
- Capitalism’s inherent instability! (economist Hyman Minsky) …the free market response to Minsky
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