White-Collar Criminologists Answer the call of Conventional Macroeconomists--Bill K Black
Full title: White-Collar Criminologists Answer the call of Conventional Macroeconomists: An Open Letter to Dr. Kartik Athreya, Research Director of the Richmond Fed
By William K. Black
April 3, 2016 Minneapolis, Minnesota
I want to thank two prominent freshwater macroeconomists, Dr. Narayana Kocherlakota (until recently the President of the Minneapolis Fed and previously the Chair of the University of Minnesotas economics department) and Dr. Kartik Athreya (Research Director of the Richmond Fed) for their article (2010) and book (2013) , respectively, designed to convey the current status of macroeconomics. Reading their descriptions, and reviewing the work of Oliver Williamson, Roger Myerson, and Leonid Hurwicz in light of the discussion of macroeconomics has made it clear to me that the central difficulties in micro and macroeconomics are with concepts that are the core of what we study as white-collar criminologists and what I dealt with as a financial regulator. There is, therefore, an opportunity for substantial advances should economics draw on the findings of the discipline (white-collar criminology) and the insights of the professionals (successful financial regulators) with the preeminent expertise in these problem areas. Athreya also stresses the key role of law and how the effort to contain fraud explains significant portions of the legal rules for commerce. I also have expertise in law.
Since I combine those three forms of expertise and teach various microeconomics courses, I thought I would write this open letter to orthodox macroeconomists and macroeconomists. For reasons that I will discuss, the perfect person to address is Athreya, with a cc to Kocherlakota.
Where economists have drawn on our insights, the results have proven successful. Indeed, I will show that one of the greatest opportunities for the advancement of modern macro (and micro) economics would be to cease ignoring George Akerlof and Paul Romers 1993 article Looting: The Economic Underworld of Bankruptcy for Profit. I can think of no other field in which a Nobel Laureate, writing in his area of greatest expertise (fraud is the most damaging form of asymmetrical information), who proved correct and explicitly warned his field about the need to focus on looting (via accounting control fraud) would be religiously ignored by scholars in his or her discipline.
Athreyas Twin, Interactive Central Impediment[s]
remainder in full: http://neweconomicperspectives.org/2016/04/white-collar-criminologists-answer-call-conventional-macroeconomists-open-letter-dr-kartik-athreya-research-director-richmond-fed.html#more-10196
think
(11,641 posts)The irony is that because white-collar criminologists and effective financial regulators are multi-disciplinary we have drawn on and learned from the best economics. We then advance and refine those principles because we use reality and other scientific research methodologies that are better able to observe and understand dynamic considerations and feedback effects that are assumed out of existence (often implicitly) by DSGE and ADM models.
Our fields are pathologically riddled with complexity because that complexity was generated by pathological CEOs to aid their frauds. The sophisticated fraudsters we identify, counter, and prosecute would pervert any game theoretic solution generated by orthodox economists without working up a sweat. My article on the Japanese dango (bid rigging cartel) provides an example of that ability in the real world.
Jefferson23
(30,099 posts)His work is exceptional, thanks for your reply.