Prospect magazine’s top 25 brains of the financial crisis

Prospect Magazine has named the 25 brains who have contributed to the public conversation in this financial crisis. Let me give away  the winner right away- Simon Johnson.

Who has contributed best to the “public conversation” during these turbulent times?

The financial crisis has destroyed both wealth and received wisdom. The idea that prices are always right and markets self-correct is fatally challenged. Even Alan Greenspan admits that the “whole intellectual edifice” of the efficient market hypothesis collapsed in the summer of 2008. The financial establishment is in a state of deep confusion. As the FT’s Gillian Tett put it in September’s Prospect: it is like “a priest who has lost faith in the Bible, but still has to go to church.” But this is not a bad thing, for it has opened up new ways of thinking about markets, institutions and the all-important cause of financial reform.

Unfamiliar voices have come to prominence, aided by a new wave of financial bloggers eager to push fresh ideas. But who has made the most impact? Prospect assembled a panel of experts to draw up a list of leading “public intellectuals” of the financial crisis in 2009 and then decide on the most important. Our criteria were simple. Anyone who had made an impact on policy with their ideas, or who had changed the “public conversation” was a candidate.

The panel sifted hundreds of names, with an unavoidable bias towards Britain and the US, but felt the most important contributions had been in financial reform—those trying to work out what to do next. The crisis has laid a staggering financial burden on the world, with some $14 trillion propping up US and EU banks. We cannot afford another one. Moreover, we urgently need a new regulatory philosophy. Are liquid markets always good? Is complexity in financial services harmful? Can finance firms stop “herding,” creating wild booms and busts?

After considering so many names, came the final list.

We considered all of this, and gradually whittled the names down to a shortlist of just 25 (see facing page), and then a top three. In reverse order, the bronze medal went to Adair Turner, chairman of Britain’s Financial Services Authority, who bravely questioned the social usefulness of some financial activity, and called for regulators to force banks to hold more capital against risky trades, cutting their profitability. Next, silver went to Avinash Persaud, a respected analyst who spotted nine years ago the dangerous interaction between firms “herding” and new risk management techniques. During 2009 he has been arguing for new “macro-prudential” regulation to stop what he discovered a decade ago.

But there was a clear winner. He is Simon Johnson, an economist at the prestigious Peterson Institute in Washington, DC, who has been leading the argument against overmighty banking. His ideas are well grounded in theory, but he has also done more than any academic to popularise his case: writing articles, a must-read blog, and appearing tirelessly on television.

This is thoroughly deserved. I think Simon Johnson will come tops in most of such lists. I just took a relook at FP’s top 100 thinkers list and am surprised not to find Johnson’s name there at all.

His write up on financial oligarchy has changed the way we think about financial sector completely. He has followed the article with numerous write-ups and follow-ups on how things are only getting worse and unless we reform it, more crisis are going to follow. This coming from a ex-Chief economist of IMF is itself quite revolutionary and has goven it the necessary weight.

One Response to “Prospect magazine’s top 25 brains of the financial crisis”

  1. Is Financial System Dysfunctional? « Mostly Economics Says:

    […] Financial System Dysfunctional? By Amol Agrawal Adair Turner’s speech and Prospect’s top 25 list alerted me to the work of Paul Woolley. Paul Woolley has worked in financial firms, at IMF, has […]

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