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What drove the financial crisis? Structuring our historical understanding of a predictable evolutionary disaster

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  • Michael G. Jacobides

Abstract

This article revisits the 2008 financial crisis, considering how we can draw on the historical record to reappraise what created the problems and inform theory. It looks in detail at neglected factors such as the nature of the selection environment, the agency of actors, and the influence of structure. On the basis of that evidence, as well as the premise that feedback, rather than foresight, drives behavior, we reach new conclusions on what drove the crisis, and open up an exciting opportunity for historical methods to inform theory. This challenges current policy in terms of the idea of 'Too Big To Fail' and the focus of regulation; it also helps us revisit the lessons that we should take from this crisis, taking us away from macro-economic factors and individual malfeasance towards structure. Overall, the analysis suggests that a historical, institutional, and evolutionary analysis, based in theory, can add a fresh perspective.

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  • Michael G. Jacobides, 2015. "What drove the financial crisis? Structuring our historical understanding of a predictable evolutionary disaster," Business History, Taylor & Francis Journals, vol. 57(5), pages 716-735, July.
    • Handle: RePEc:taf:bushst:v:57:y:2015:i:5:p:716-735
    DOI: 10.1080/00076791.2014.975120
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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
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    3. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    5. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Chapter 1," MPRA Paper 17452, University Library of Munich, Germany.
    6. Dean Baker & Travis McArthur, 2009. "The Value of the “Too Big to Fail” Big Bank Subsidy," CEPR Reports and Issue Briefs 2009-36, Center for Economic and Policy Research (CEPR).
    7. Anat Admati & Martin Hellwig, 2013. "The Bankers' New Clothes: What's Wrong with Banking and What to Do about It," Economics Books, Princeton University Press, edition 1, volume 1, number 9929.
    8. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111.
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    Cited by:

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    2. Sidney G. Winter, 2016. "The place of entrepreneurship in “The Economics that Might Have Been”," Small Business Economics, Springer, vol. 47(1), pages 15-34, June.

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