hello i'm here with the professor she the dow professor i'm a is a asserting
university and a long time friend about it thank you very much for going to
be q s
i wanted to ask you know what you're going to be presenting at the conference
i'm going to be talking about an insurgency
which is something that some very much in people's minds because of the crisis
but
in this is something i've worked on for a long time
but what you want to focus on here is the way in which a subsidy
affects
the structure of the economy is not just a matter of
how it affects peak at all that's really important
but i want to talk about the ways effects structure which really
reinforces the keynesian argument that answers until to be taken
seriously and in mixed at positions corresponding to recognise the importance of uncertainty in a
sense see the whole idea of animal spirits a overrides the onset the elements what
i the uncertainty is implicit in his whole economic analysis
and it and i mean it it's bright from the foundations upcoming get comes from
this work in philosophy which predated his economic so it really
is right in that the ground and i mean for some particular concerned about just
the fact that mainstream economists filed are talking more button certainty
are not really grappling with
an inability to quantify risk
and they regard to something
to be added into c v
yes that they don't think they are reading a bit more fright night because he's
of the i idea that at a certain level the chaney one uncertainty
is a normal unquote i'll or risk and that's what you think the party absolutely
and the crisis to be we so markets precinct which is very complicated buttons of
and the ability to price
and to encode would be a you been doing is you actually draw you've taken
quite an interdisciplinary approach like means of course came to withdraw no loss with you
also don't as well the working in a look at some of the latest a
cycle psychological studies and my understanding is that
you know what we're learning about the way human being tracked radical certainly what that's
like also teaching as is very different from what the economic textbooks teachers
that's right that the reason i looked a psychology is because read following canes it's
clear that human decision makings not separable and sir
rational
optimising
i can decision making on the one hand
and emotional
reactions on the other pictures
defined by many is as irrational that rather it's a combination of the two
and when i look at that some fact i'm going back to the scottish enlightenment
traditional because that's an idea that's very important just miss and you
clearly it's something that wasn't read the body see the rational expectations colby
i and what you think the implications that are first for foreign for the way
we teach economics
well i'd like to see economics first are being taught in terms of
the possibility of different approaches to the subject
i mean i obviously have more confusable output
the approach that i prefer and the type of csi prefer
i think
it's in portion for students to be aware that because of our uncertainty
we have to choose between a range of different approaches
and have to be able to justified for each of our approach we take
to others and
and you mention your own personal preferences so wanted to elaborate on those a little
bit
well my preferences for propose kings in approach which is a
at a particular interpretation of k-means which draws on this philosophy as well as
and as part and parcel this economics
okay and clearly the there's a lot more often in inpainting problem were courses in
some ways helping to remove it here and i am but in the world real
world of policymaking
we don't seem to be making much headway and that's a particular the prominence in
the u k where you're asked to you would you care to comment on that
the rest
a lot of public discourse but canes which there wasn't before the crisis so at
the at least
there is an awareness of kansas arguments about
the need for fiscal stimulus
in a recession what's missing
is all the rest of cans which provides an explanation for the crisis
really building on this theory open-source and t
and that's what i think its own portion just need to be
to focus on that aspect of kansas thinking back rather than to think of it
is something that's just a effects of a crisis that actually to understand
the way economy speaking of
and in non trained systems
and what is what do you think the implications but also a for you know
what we're doing a little the regular tree frog know what you think the implications
of this uncertainty principle you like all from terms of regulation
well i think it it's
it's more portion
in terms of thinking about this is institutional structure within which regulation occurs
and the way in which regulators
can encourage practises
there's the travel speculation is that it's imposes constraints on a set of which doesn't
like constraints in this very innovative
at responding to constraints so i mean of a starting against regulations search for watermarking
is that there has to be as much attention
to the institutional structure the way in which the regulators the one that resources
behave with the banking sector
so that
there needs to be
a build a proper relationship between the two as there was
happen till the seventies where there was a an understanding that the
the central bank and
commercial banks
how did not an obligation to each other
the banks for effective least franchised
to reduce my money and there was a recognition problem partition community banks are somewhat
unique in that regard because it is the only business
where effectively your liabilities the business model is about is not by the government's well
i suppose required to the banks don't seem to see that when less a losing
money which point also the public backstop becomes very important one h m
yes but i mean deregulation gave them much more filtering to processing that the blind
so that
they
to backed off their side of the deal
and we don't really seem to be read regulating it seems to me that we
have an increase the complex structure and that we are instead of trying to simplify
that structure to deal with say the channel response or do we seem to be
introducing
more and more cumbersome regulations which in turn the bank was trying to game and
so that the system doesn't fundamentally changes was well and it doesn't do with the
channels you set out
yes i think it's really important address the issue of the cultural banking
and i mean this is something that is discussed
quite widely in the financial times mean in
public discussion but not an economics i think was an obligation economists to be able
to provide
some guidance
and haven't you tell we just what you if you were the position of the
chancer miraculously i think would be very good idea would call you tomorrow one and
ask people by what would you tell in recall say and specifically
well first started say take advantage of the fact that
you have
a lot of sway over as the banks and which there is large public ownership
the that
that should have been a wonderful opportunity to
push a change in culture by example and i know it's a very difficult thing
to do but it's
something that there has to be some change no
this is often thought of as something
outside economics
but we possibly arguing later on today is that this is
this is very much part and parcel of the way in which an economy functions
because of uncertainty it requires conventions
conventional practises stress
all these things before and also shows the logical and political and indeed value judgements
come into it which also the as you say that's been what we this is
of economics profession in a it forgets that it's a social sciences opposed to a
and like to thank of itself as the size and
and even size is not the devoid of a value judgement switch to but the
received signal be or mainstream economists and seem to think well be reduced a simple
mathematical equation someone human experience
so that seems we will be a challenging slot and like you i part of
the u k a had a very strong approach to be too huge chunks would
be back but i get the sense of they're looking to know now that there
was talk about writing them up making them to
it's just a smaller less the symmetry dangerous institutions but the under the you'd modeling
importance of the banking industry that schemes will be changing
well i mean i don't have any particular information about how things are going but
i think it
it would be really important splits off retail banking
because it's retail banking but provides societies mommy
no the
it's difficult to be a lender of last resort to massive institutions which are engaging
all sorts of
praxis which are not the presence of a traditional retail banking
so a between forty i'd like to see is returned the idea that we happy
still bank spectra which are fairly constrained
and yet have the privilege of wonderful unstressed absolute improvement
and so i think it's important that
the presumption be the banks don't fail in other words it's i think it's important
to look at banking and
in term in positive terms of for banking
can and then d
should do
gorgeous also credited to mediation for example is close to explore data for example talk
about how nine percent of investment banking activities that don't have any some kind of
social utility
well that's a yes i mean he made able to that statement that allows for
all i
but how well is segregated and i institutionally in the u k context
yes it's i mean there are clearly huge difficulties
i mean as i understand that it should be possible to ring fence retail banking
within large organisations i mean it requires
what you hear the victory
yes i'm
i mean somebody's the more satisfaction approach would be to separate
retail banking off and institutionally
but it
it could also be possible to ring fence but it really requires very close attention
to for banks of doing emission
to mine additionally important for the four
the authorities to really close knowledge
of what's going on the ground with in banking
so that they can be a lower for any changes in practice since and
so the holidays of course of the conventions in the practise is keep changing they
keep getting much more elaborate and it's particularly difficult to achieve bank this discipline via
the liability side of the right balance sheets now i i've always felt that the
important thing to do is to
restrict the range of activities so that you don't actually have this complex regular tree
structure
yes
but the way with that the that doesn't seem to be anyone moving in that
direction even though that would be consistent with what you are in the papers for
yes
and there is talk about i mean for seem to be
straightforward measures let alone restricting one class separation
and so on approach point get round the problem of excessive mortgage lending for example
so that you know i think that's along
a lot that can be done with fairly simple
simple recognition and you get any sense that the there's any movement in that direction
any recognition of this in all of us are rules and the u k
it certainly widely talked about
but may have to wait for another government
i think of that a somewhat less than a little i thank you very much
for agreeing to speech translation mapping like slot