Financial innovation and the crisis

Resumo

Berkeley Professor Barry Eichengreen distinguishes between financial innovation itself, which can be a good thing for shifting risk to those who can handle it, and how we have permitted it to be used, which, given the number of unsophisticated users in the marketplace and the asymmetry of the information available to them, can have undesirable effects. Following Schumpeter, he sees as the way out an economics better informed by history — for instance, history will remind us that asset booms will not last forever.