Against the Tide. Notes on the Present Financial Crisis

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The economic crisis, started in 2007 and with an uncertain ending, is an important discussion topic for the people at large. It is probably the worst crisis in the last 80 years. Also, it gives economists the opportunity to speak openly and embrace wholeheartedly the views of one of the two main ideological sides: the mainstream thinking, which argues for an increasing role of the state in the economy, and the free market advocates.

We have an official explanation of the crisis, provided by public institutions, according to which the turmoil has resulted from inappropriate economic behavior (keywords: greed, speculation etc.) and the market failure to work smoothly, achieving an optimal allocation of resources (keywords: asymmetric information, liquidity trap, deflation etc.) This interpretation of the crisis has plenty of supporters.

On the other hand, it is argued that the seeds of the present financial problems have been seeded precisely by the past state intervention. According to such arguments, the solution advanced by authorities cannot alleviate economic difficulties, on the contrary, it will aggravate them.

In this book I try to support the second intellectual side. Interventionists' arguments seem unconvincing to me; they are so unrealistic and inconsistent that they deserve to be strongly criticised. I am even more stimulated in my attempt by the fact that in Romania there is virtually no debate on this issue. The stake is high: it concerns both the society's wellbeing and the future of economic science. No sensible economist should ignore this.