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Soros to Spend $50M to Reinvent Economics

Fund manager's think tank charged with reinventing the field

By Jason Farago| Posted Oct 28, 09 9:44 AM CDT|

(Newser) – George Soros has decided to spend $50 million to launch a new think tank charged with reinventing the field of economics, which the Hungarian-American billionaire calls "a dogma whose time has passed." The Institute of New Economic Thinking, whose board members include luminaries such as Joseph Stiglitz and Jeffrey Sachs, will analyze the principles of economics in the wake of a financial crisis that discredited decades of research. "The dogma has lost touch with reality," Soros tells the Financial Times.

Economists largely failed to predict the financial crisis, and even Alan Greenspan now says the efficient market model he espoused contains a "flaw" that has to be remedied. INET will fund fellowships and support research aiming to fix that flaw, though Soros admits changing the discipline will take time. "The ideologists in the free markets are still in command," he says, "and I think they’ll be very difficult to remove because they have tenure."

George Soros testifies on Capitol Hill in Washington, Thursday, Nov. 13, 2008. (AP Photo/Kevin Wolf)

Financial analyst George Soros speaks during a news conference at International Monetary Fund headquarters in Washington Sunday, Oct. 12, 2008. (AP Photo/Jose Luis Magana)

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48 comments

VIEWING:

Robert_NYC
Oct 28, 09 9:58 AM CDT

What a crock. So Soros is going to re-invent economics by hiring economists he agrees with? More political propaganda from an activist! Next $50 million goes to who's election campaign? Reply

-2

IN RESPONSE:

RockyPneumonia
Oct 28, 09 10:17 AM CDT

Robert, here's your chance to prove you're not a right-wing wacko. All you have to do is demonstrate why and how the current model is working.

IN RESPONSE:

alkaseltzersammich
Oct 28, 09 11:23 AM CDT

Robert is just popping off at the mouth and has no idea what he's talking about. Of course he won't be able to demonstrate how the current model isn't working.

IN RESPONSE:

Robert_NYC
Oct 28, 09 11:37 AM CDT

Demonstrate how it is not? This top comment only demonstrates Soros's activism and propaganda.

IN RESPONSE:

IndependentThinker
Oct 28, 09 12:31 PM CDT

@Robert: The recession...

IN RESPONSE:

Robert_NYC
Oct 28, 09 12:39 PM CDT

@independant - a recession proves economics are not working? That does not make sense. Economic cycles are a fact of economics - no way to eliminate them. This recession is unusual as it was a result of a collapse in the mortgage market. This does not prove economics was the culprit but does narrow down where to look - lending practices and some of the practices of financial engineering are where I believe the attention needs to be focused. Proposing that there is a recession therefore capitalism or any school of economics are to blame is off base. If you are saying that capitalism caused the recession then your position is that socialism never produced a recession?

IN RESPONSE:

NikiBGD
Oct 29, 09 9:09 AM CDT

| 0 minutes ago

Derni
Oct 28, 09 9:59 AM CDT

A few people predicted this horrific economic problem-but people ignored them as prophets of of the far left..well guess what? Reply

IN RESPONSE:

Robert_NYC
Oct 28, 09 2:28 PM CDT

Quite a few capitalists predicted this as well. By your argument the left is wrong?

| 0 minutes ago

Robert_NYC
Oct 28, 09 10:04 AM CDT

People knew about the derivatives house of cards for a decade. I did and it is not like I was 'in the know'. What happened was the banks lent a lot of mortgage money to people that never should have been borrowers. Credit standards were relaxed too much and the derivatives people built their house on 'sand'. When the public started defaulting and not paying their mortgages in an economic slowdown the house of cards came down. 1) Don't lend money to people that are not credit worthy. 2) Don't build financial instruments on non-credit worthy instruments 3) Don't listen to Soros - he ia a political activist and will spin you until you agree with him. 4) DONT LEND MONEY TO PEOPLE WITH McJOBS! Reply

IN RESPONSE:

UseReason
Oct 28, 09 10:27 AM CDT

Great points Robert! I have one more to add: 5) Keep the government out of the financial sector. Lets think of the major screw ups... Complete failure of the SEC to see fraud and scams, most notably the Ratings Agencies and Madoff. They implemented Fair Value Accounting wules which do not follow some of the basic assumptions of economics. Fannie Mae was the worst offender in the whole process with a leverage ratio that made the investment banks look like charities. Thanks for the 5+ Trillion in liabilities, Fannie!

IN RESPONSE:

RockyPneumonia
Oct 28, 09 10:34 AM CDT

UseReason, it's interesting that the "major screw ups" you cite were caused by LACK of government supervision and regulation.

-1

IN RESPONSE:

UseReason
Oct 28, 09 10:40 AM CDT

Rocky, are you suggesting that the problem with these government agencies, the SEC and Fannie Mae, is that the government is not regulating or supervising themselves enough? I think I am missing your point, please clarify.

-4

IN RESPONSE:

RockyPneumonia
Oct 28, 09 10:50 AM CDT

"Complete failure of the SEC to see fraud and scams"...It seems that YOU are saying that the problem is lack of government supervision and regulation of the industry. If only the Republicans hadn't instituted "faith-based" government -- the "faith" in this case being their irrational belief that corporate America will behave ethically without government involvement.

IN RESPONSE:

Fondue
Oct 28, 09 11:13 AM CDT

Fox guarding the hen house is not very reasonable.

IN RESPONSE:

Fondue
Oct 28, 09 11:15 AM CDT

UseReason, you may want to answer the question: who is ultimately in charge of the SEC when everything got bad?

IN RESPONSE:

Robert_NYC
Oct 28, 09 11:27 AM CDT

Actually there was no significant 'fraud' - it was more a structural problem. The markets operate in the structure given them by regulations and the fracture that occurred was sponsored by incorrect lending that flooded the housing market with money (everyone and their brother gets a mortgage regardless of ability to pay it back) which caused a bubble in prices and then popped when an economic slowdown caused the borrowers to default on the loans they never should have taken out. In some ways it was a social mania and addiction fed by too easily obtained mortgages. The financial markets did not malfuntion - they just played by the rules and framework set up by the government, and mostly propagated by Fannie and Freddie and their 'AAA' status. The origin of the collapse is with incorrect lending and the regulations that made these loans possible. Not really fraud - just mismanagement by D.C.

IN RESPONSE:

UseReason
Oct 28, 09 11:32 AM CDT

"'Complete failure of the SEC to see fraud and scams'...It seems that YOU are saying that the problem is lack of government supervision and regulation of the industry." The problem I am trying to explain is that the SEC creates a false sense of security, shifting responsibility away from corporations. I dont see what political parties have to do with this; this is an issue of free-market and government control. Fondue - The government is in charge of the SEC and things got bad when the SEC was created.

IN RESPONSE:

Robert_NYC
Oct 28, 09 12:08 PM CDT

What could the SEC have done to avert this? The derivatives were insurance products, the lending was stipulated by congress and law. I am not defending the SEC at all - I think they are a joke, but the problems originated outside their area of control.

| 0 minutes ago

No_FRINGE
Oct 28, 09 10:08 AM CDT

Sachs' "The End of Poverty" and "Common Wealth", both New York Times bestsellers ... amazing. Stiglitz was awarded the Nobel prize (and he actually DID something!) Kudos to Soros. Reply

-2

IN RESPONSE:

Robert_NYC
Oct 28, 09 10:29 AM CDT

Really? you mean the New York Times supports a left wing book? Funny fact - The New York Times has also refused to review books they do not agree with politically. Why do you think The Geriatric Lady is dying and has marginalized itself?

| 0 minutes ago

Doctor_Zaius
Oct 28, 09 10:20 AM CDT

Oh, scary! A rich guy who doesn't support right wing think tank-propaganda machines! Run for the hills! Guess what. There are a hundred Soros-like billionaires on the right pumping cash into propaganda machine think-tanks and fake studies. Reply

IN RESPONSE:

Robert_NYC
Oct 28, 09 12:14 PM CDT

I am not scared by this - more amused than anything. Just pointing out the fact that he is not going to 'reinvent' anything - especially economics. This is just propaganda and politics.

-1

IN RESPONSE:

cornelison
Oct 28, 09 9:46 PM CDT

And don't they meet together in different locales that none of know about? And aren't most of their activities tax deductible? Call me a cynic because there has to be a self-serving angle to this.

| 0 minutes ago

Robert_NYC
Oct 28, 09 10:26 AM CDT

Obama got the Nobel prize FOR DOING NOTHING. Kinda invalidates the Nobel selection process. Economics has had Nobel Prize winners from both the Keynsian and Monetarist schools - you can characterize them as Austrian School, Harvard vs. Chicago, etc... and both sides have won awards and been right and wrong for centuries. Hiring someone from one side to 'reinvent' economics is retarded. I have advanced degrees in business and economics so I see the folly and propaganda in this ploy. Reply

IN RESPONSE:

cornelison
Oct 28, 09 9:47 PM CDT

Cheney could win a medal for doing too much.

| 0 minutes ago

Robert_NYC
Oct 28, 09 10:35 AM CDT

Rocky - a recession proves economics does not work? You really should understand the subject before you opine. My advice for you try this link...http://www.amazon.com/Macroeconomics-Economics-Business-Investing-Books/b/qid=1256744057/ref=sr_tc_2_2?ie=UTF8&node=2596...but an economics book. Read it. Reply

IN RESPONSE:

RockyPneumonia
Oct 28, 09 10:53 AM CDT

One thing I do understand, Robert, is that every major American economic downturn in the past 100 years has immediately followed an extended period in which conservatives were in power.

| 0 minutes ago

Robert_NYC
Oct 28, 09 10:39 AM CDT

Rocky - the 'lack of government' was the government itself. Who do you think collateralized all the bad paper? Fannie and Freddie. And if you want to start pointing 'deregulation' fingers - start with William Jefferson Clinton - he repealed the Glass-Steagal Act and is the greatest financial deregulator in the history of the world. Fact check it - its true whether you want to believe it or not. Reply

IN RESPONSE:

RockyPneumonia
Oct 28, 09 10:55 AM CDT

I wonder if James Madison, Ben Franklin, and George Washington realized that the president could repeal legislation; I'm pretty sure they thought that only Congress could do that. I do love, though, watching RWWs scramble to avoid admitting that their ideas screwed up the country.

IN RESPONSE:

Face-Of-RNC
Oct 28, 09 12:59 PM CDT

What I believe is Reagan supported deregulation great deal more than any other president in the history of the country.

IN RESPONSE:

Robert_NYC
Oct 28, 09 2:17 PM CDT

Reagan supported deregulation yes, but as far as deregulating the financial industry - Clinton is king.

IN RESPONSE:

cornelison
Oct 28, 09 9:50 PM CDT

The liberals grew to hate Clinton for turning his back on them too.

| 0 minutes ago

Remote
Oct 28, 09 10:55 AM CDT

See:http://twisri.blogspot.com/2009/07/bernankes-history.html Why the market failed - http://twisri.blogspot.com/2009/03/why-market-failed.html Adam Smith on the Current Financial Crisis - http://twisri.blogspot.com/2009/04/adam-smith-on-current-financial-crisis.html What happened. What now. - http://twisri.blogspot.com/2009/04/commercial-and-investment-banks-used.html To REALLY see what went wrong, take a look at page 6: http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf See page 2: http://www.sec.gov/rules/proposed/s71005/wcunningham5867.pdf Also see: http://www.ethicalmarkets.com//wp-content/uploads/2008/12/financialbailoutcomment1.pdf Reply

| 0 minutes ago

Robert_NYC
Oct 28, 09 10:56 AM CDT

And you infer from that conservatives are the problem? For a downturn to occur you need an up right? Economic cycles are a fact therefore maybe to be inferred from this (If your fact here is actually correct) is that conservatives have caused every major upward economic cycle? Reply

| 0 minutes ago

Robert_NYC
Oct 28, 09 11:04 AM CDT

Rocky - I can see that you will forever refuse to acknowledge that the origin of this recession was the collapse of collateralized mortgages spit out by Fannie and Freddie, the redlining of mortgage lending, the repeal of the Glass-Steagal Act and the trend by people to over leverage themselves to buy a second home, flip condo's etc... You can blame it on 'conservatives', 'liberals' etc... But the practice of lending to non-credit worthy borrowers was started by Carter, furthered by Clinton and protected by Senators named Dodd, Barack and Frank. Its fact, check the top two recipients of contributions from Fannie and Freddie over the last 20 years. Check the votes against reform of Fannie and Freddie in 2005 and 2006 (legislation written and brought to the floor by McCain and backed by Bush). Check your facts first, then maybe you can draw more rlevant conclusions besides "they did it!" Reply

IN RESPONSE:

RockyPneumonia
Oct 28, 09 11:57 AM CDT

I will also forever to refuse to acknowledge that the sun rises in the west, just as you will forever continue to focus on minutiae so as to divert attention away from the overall causes.

IN RESPONSE:

Robert_NYC
Oct 28, 09 12:06 PM CDT

ah yes - the cause was capitalism. please point out all the socialist success in history. start with cuba and the soviet union please

IN RESPONSE:

Robert_NYC
Oct 28, 09 12:17 PM CDT

Rocky - two questions,,, 1) do you acknowledge the central role played by Fannie and Freddie in the debt market collapse? 2) Who voted against reform of Fannie and Freddie in '05 and '06?

IN RESPONSE:

cornelison
Oct 28, 09 9:54 PM CDT

Hi Robert. You're looking at dictatorships. Universal health care in Canada worked since the early 60's. 80% of us like it. Because of the savings for me, it allowed me to invest in the stock market. I believe in the private sector but I don't want them to touch my health plan. Ironic, isn't it?

| 0 minutes ago

Robert_NYC
Oct 28, 09 11:11 AM CDT

Come on Rocky - Congress and the Senate can do all they want - and the President can refuse to sign it. The Act which repealed Glass-steagal was signed by Clinton and here is a quote from Clinton - On signing the "Gramm-Leach-Bliley Act", President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act" Smoking Gun! Reply

IN RESPONSE:

Unaffiliated
Oct 28, 09 11:32 AM CDT

Dear Robert, please use the little gray "REPLY" button. It'll make following this discussion much easier. Thanks, the Internet.

| 0 minutes ago

JoeQ
Oct 28, 09 11:25 AM CDT

Some of you guys might want to consider reading one or two of Soros' books. His understanding of economics is what made him a billionaire. He basically learned how to see financial bubbles forming. His interests now are philanthropic, and he thinks the world would be a lot better off if bubbles were controlled better in the future. Reply

IN RESPONSE:

Robert_NYC
Oct 28, 09 11:28 AM CDT

He made a lot of money. This validates his political activism and choices? There are billionaires on both sides of the aisle and I would hazard to say that more are from the right.

-1

IN RESPONSE:

JoeQ
Oct 28, 09 11:39 AM CDT

The article is about his activities in economics. There are billionaires of all political stripes, but they are rarely stupid enough to see the structure of the financial system in a partisan light. They may use partisan rhetoric but they aren't stupid or they wouldn't have become billionaires.

IN RESPONSE:

Robert_NYC
Oct 28, 09 11:44 AM CDT

I did not say he was stupid - just an activist spitting out proaganda. I have a friend whose father is a billionaire and may be worth more than Soros. He is ardently conservative. Does this make Soros wrong?

IN RESPONSE:

JoeQ
Oct 28, 09 12:19 PM CDT

Wow, what a mess! I guess book reading isn't in your future.

| 0 minutes ago

Robert_NYC
Oct 28, 09 12:26 PM CDT

No need to read his books. Obviously, after seeing his political activism and his attempts to influence American politics I have no need to read what ab activist writes. I don't trust people with political agendas. I am a trained economist and was short all the way to the bottom. I am long gold since 2007 and I know what I am doing. No need to cloud my success by listening to someone with an agenda. Reply

-1

| 0 minutes ago

View all 48 comments »

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