As the state of the economy grows more dire every day, it is tempting to throw up our hands in frustration, or take refuge in our disorientation. Yet, the economic and political decisions being made today will affect the lives of young people for the foreseeable future. I want to sample the views of members the generation that will have to live with the decisions we make today to save the financial system, create a universal access to affordable health care, withdraw from Iraq, and change tax policy.
To bring these views to this space I have invited students enrolled in a new course that I teach at Georgetown Law Center, Contemporary Issues in Economic Justice: The Subprime Crisis, to blog in this spot, on a topic of their choosing, related to the financial crisis and the challenge of our social backdrop of economic inequality.
This course will provide an introduction to the social justice critique of free markets. Our efforts will be guided by economic and social theory, as well as financial regulatory policy. We will establish a foundation for this critique through an introduction to classic economic theories beginning with the theories of human motivation found in Adam Smith and continuing through modern economists including Becker and Friedman.
After the foundation of traditional rationales for free markets has been established, the course will proceed through a series of social justice problems for which the answers of the classic theorists have proved unsatisfactory. We will take up the puzzle of persistent empirical evidence of race and gender discrimination, notwithstanding economic theories that posit the elimination of discrimination by the market itself.
For the spring semester of 2009, the course will be concerned with the subprime mortgage crisis and the governmental response to repair the damage done to both the financial sector and the broader economy by the rapid declines in housing values. We will undertake an in depth exploration of the current global financial crisis and its origins in the regulatory response to risky innovation in the models for origination, distribution and financing of home mortgages in the United States.
The subprime financial crisis will provide an unparalleled contemporary laboratory for testing alternative economic theories for predicting the economic behavior of actors in a variety of markets. We will investigate and analyze the viability of established economic theories for financial and consumer regulation. We will discuss whether the descriptive and normative models of neoclassical economics failed during the current crisis.
Alan Greenspan, a former Chairman of the Federal Reserve, responded to a Congressional investigation of his role in the collapse of financial markets with the admission that his worldview of economic behavior was "flawed". Greenspan went on to note that: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief,"
What do these admissions of ideological failure mean as we seek to shape a recovery from the crisis? What are the alternative paradigms available to reconstruct the U.S. financial regulatory system? Are any of these theories sufficiently advanced to serve as models for implementing reforms?
We will examine the attributes of home mortgage origination markets, public and private policies that supported expansion of the market for home ownership, the racial and ethnic characteristics of borrowers who were sold high priced home loan products, we will also examine the relationship of legal rules to the distribution of housing wealth.
The course will emphasize the race, gender and other identity variables that work to create and preserve economic inequality. A central exploration of the course will be the problem of race and gender discrimination in the home mortgage lending market and the governmental response to that longstanding economic and social problem. We will make use of a range of materials taken from sociology, economic argument, political theory, constitutional discourse and the critical legal theories of race, gender and social class.
Two blog entries from students enrolled in this course follow.
Disclaimer: The views expressed in the student blog entries do not represent my views, or those of Georgetown University. They are the individual expression of each student who is solely responsible for the content of their message.