Re: 2007 Nobel-Economics winners warned us "situations in which markets work and others in which they don't"

In article
<56763f2f-6f24-4103-9e4d-746584eae74b@xxxxxxxxxxxxxxxxxxxxxxxxxxxx>,
Florida <demeter547opine@xxxxxxxxx> wrote:

The mess that Greenspan made:

The Nobel Prize and the "super-conduit"
Monday, October 15, 2007

There is more than a bit of irony in the announcement of the Nobel
Prize in economics within a day or so of the announcement that major
U.S. banks plan to set up a "super-conduit" fund to flush all the bad
mortgage debt out of the system.

The Associated Press reports:

Americans Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson won
the Nobel prize in economics on Monday for developing a theory that
helps explain situations in which markets work and others in which
they don't.

The three researchers "laid the foundations of mechanism design
theory," which plays a central role in contemporary economics and
political science, the Royal Swedish Academy of Sciences said.
...
Their theory lets economists, governments and businesses
"distinguish situations in which markets work well from those in which
they do not," the academy said in its citation.

Meanwhile, the Financial Times reports:

Citigroup, Bank of America and JPMorgan are on Monday expected to
announce plans for a fund to buy mortgage-linked securities in an
attempt to allay fears of a downward price-spiral that would hit the
balance sheets of big banks.

A person familiar with the discussions said that US banks
collectively were expected to put up credit guarantees worth about
$75bn for the fund, named the Single-Master Liquidity Enhancement
Conduit (SMLEC).
...
The concept of an SMLEC first emerged three weeks ago when the US
Treasury summoned leading bankers to discuss ways of reviving the
mortgage-linked securities market and dealing with the threat posed by
structured investment vehicles (SIVs) and conduits.

The Treasury acted as a neutral ³third party² in the discussions,
and Hank Paulson,Treasury secretary, was strongly in support of the
initiative.

Maybe if the work of Hurwicz, Maskin and Myerson had been available a
few years back, if the Federal Reserve gave a hoot about asset
bubbles, and if regulators weren't asleep at the wheel, this whole
credit, housing, and mortgage market mess could have been avoided.

Clearly, having some tool to help explain "situations in which markets
work and others in which they don't" wouldn't have hurt.
_______________________
http://themessthatgreenspanmade.blogspot.com/2007/10/nobel-prize-and-super-co
nduit.html

Having an economic crisis during the Nobel Prize announcement season is
a coincidence and should not be confused with cause and effect. I am
happy for the recognition of a significant discovery regarding the
workings of international trade. But Gordon Brown has saved us by
convincing the world of a better way to return fluidity to markets.

--
C-SPAN3? http://inside.c-spanarchives.org:8080/cspan/schedule.csp?
http://www.cnn.com/2008/POLITICS/09/23/paul.bailout/index.html
http://www.sciencefriday.com/ http://www.backyardnature.net/rabbits.htm
Oops: http://openthread.dailykos.com/storyonly/2008/9/24/193352/735/868/609334
.

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