Beyond scapegoats: what caused the financial crisis?

Models and realities

Media:  Talk   

April 25, 2015

Byens Lys

Raphael Douady

Raphael Douady is a French mathematician and economist at Centre d’Economie de la Sorbonne, Paris Sorbonne University, an invited Professor at New York University Polytechnic Institute, and academic director of the Laboratory of Excellence on Financial Regulation. Homepage

Debre Damo Dining Orchestra

Debre Damo Dining Orchestra is Copenhagen's leading outfit in Ethiopian swamp jazz as we know it from Ethiopiques such as Mahmoud Ahmed and Mulatu Astatqe. It is the heavy groove and the crisp, narrative fan group that is a precursor of the band's organic low-fi funk. Homepage

What (rather than who) can be blamed for the financial crisis? How come mathematical models weren’t able to anticipate it? How can financial regulation have negative effects and can that be avoided? Can we, should we, eliminate speculation? Are we still following economic cycles and, if so, when is the upturn coming?

In September 2008, following the bankruptcy of Lehman Brothers, the financial system experienced the most serious crisis since 1929. This crisis spilled over through the whole world economy.

Despite massive quantitative easing, multiplying monetary masses and bringing public debts towards unprecedented levels, unemployment is still a major concern and growth is long to recover. The first reaction of the financial community was to blame mathematicians who had led them to irresponsible actions supported by erroneous models. People weren't been fooled for too long by this obvious scapegoat and soon, the financial industry as a whole was designated as responsible for the people’s suffering.

As always, these shortcuts hide a much more complex reality, which Raphael Douady shall try to describe with as much intellectual honesty as he can. If one cannot deny that finance is necessary for a proper functioning of the economy, needless to say that its excesses are detrimental. Understanding the deep mechanisms that led to the crisis is not only a path to a correct positioning of the regulation cursor. It is also the way to design efficient regulation, that which helps economic resilience instead of paralysing it. Douady’s effort will be to explain the dynamics of finance and its procession of paradoxical effects, what traditional models were missing and which mathematics need to be used for a better understanding of the relation between finance and the economy.

Afterwards, economic cocktails low on crisis and high on bubbles while Debre Damo Dining Orchestra takes the stage playing Ethiopian jazz.

Entrance to the event is free. No registration is necessary. Doors open at 19:00.

The talk: