Acemoglu on Inequality and the Crash

More

This excellent podcast interview with MIT's Daron Acemoglu examines the role of income inequality in the crash. Raghuram Rajan famously argued in his book Fault Lines that rising inequality called forth a political response--notably, housing subsidies--which in turn inflated the housing bubble. Acemoglu argues instead that politics was the root cause of both the increase in inequality and the financial crisis. He puts the argument very clearly, both in the interview and in this set of slides from the Denver AEA meeting, where he and Rajan were on a panel together.

If you listen to the interview you should also read Rajan's response to Acemoglu's position. Acemoglu makes many good points, but I don't entirely buy his version. To my mind, the role of Fannie and Freddie, though certainly not the only thing going on, was much more important than he allows. More generally, depending on exactly how they are framed, these two broad explanations are not mutually exclusive. Both causal chains could perfectly well have been at work simultaneously. Why insist on choosing one over the other?  

Jump to comments
Presented by

Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

Get Today's Top Stories in Your Inbox (preview)

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Politics

Just In