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 Minnesota’s 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 Romer’s 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.…Absolutely must-read.
New Economic Perspectives
White-Collar Criminologists Answer the call of Conventional Macroeconomists: An Open Letter to Dr. Kartik Athreya, Research Director of the Richmond Fed
William K. Black | Associate Professor of Economics and Law, UMKC