A Simple Theory of the Financial Crisis; or, Why Fischer Black Still Matters

摘要

Nouriel Roubini ("Dr. Doom") and the late Hyman Minsky are often heralded as the economic prophets of the current financial crisis. But there are also connections between recent events and the work of Fischer Black (1938-1995). Best known for his seminal work in option-pricing theory, Black also wrote extensively on monetary economics and business cycles.rnAn enigmatic thinker, Black sometimes wrote in epigrams or brief sentences and did not present his macroeconomic views in terms of a formal model. For that reason, interpreting Black is not always easy. Nonetheless, Black's writings offer ideas for explaining the current crisis, most notably the idea that a general risk-return tradeoff governs business cycles. Black also stressed "noise traders," T-bills as the new form of cash, the inability of monetary policy to address many downturns, and the notion that a business cycle is characterized by significant sectoral shifts.