The Chicago School after the crisis of the new mil

Authors: Giuseppe Garofalo Paolo Fetoni

Publish Date: 2011/07/29

Volume: 47, Issue: 2, Pages: 677-711

PDF Link

Abstract

After the selfcriticism of Richard Posner A failure of capitalism The crisis of ’08 and the descend to depression Harvard University Press Cambridge 2009a and some later papers a position shared in part by Gary Becker it is right to ask what exactly remains of the Chicago School which came into being in the early 1930s with Knight and made a name for itself in the 1980s as the new orthodoxy with Lucas Reh and Fama Emh The financial crisis has in this sense cast the debate between the Saltwater school the American universities on the coast and the Freshwater school the universities near the Great Lakes including Chicago in a new light This article traces the development of the Chicago School the consolidation of conservative thinktanks especially the Mont Pelerin Society whose members have included among others von Hayek and Friedman and the more recent positions of the School including some that are less organic Diamond Kashyap Rajan Zingales At the centre of the debate is the question of the failures of the State vs the failures of the market and the role of institutions On a methodological level the relationship between law and economics LE is also in discussion which leads to an interesting comparison between Chicago again Posner past and present and Yale Calabresi After having described the echoes of the debate across the Atlantic with particular reference to Italy it will be asked if the anomalies that can be found in the consolidated paradigm Reh Emh but also LE will lead to the abandonment of preconstituted models in favour of a less rigid theoretical framework Ike together with Keynes and the Chicagoan Knight but also to a certain extent von Hayek or simply a pause for reflection

Keywords: