Gresham's Law in Economics: Background to the Crisis

Sir Thomas Gresham said that "bad money drives out good". In Economics, bad theory has driven out good. This fact shaped the decisions of bankers and regulators and thus serves partly to explain the crisis that broke in 2007 and whose shadow extends to this day. This lecture will explore key areas in which Economics has chosen to take what Victoria Chick regards as the wrong path and how these developments led to changes in the institutional structure of the economy and the behaviour of its participants that made it less stable and less able to contribute to general economic well-being.