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Why American Democracy Thrives On Conflict

by Julia Hanna

Intense political conflict, mediated by shared ideals, has always been with us and is profoundly American, a lesson David Moss drives home in his new book, Democracy: A Case Study. The problem: Not all conflict is productive. Open for comment; 0 Comments.

Why Isn't Business Research More Relevant to Business Practitioners?

by Carmen Nobel

There’s a pervasive paradox in academia: Research conducted at business schools often offers no obvious value to people who work in the world of business. Professors and practitioners weigh in on how to enhance the relevance of research. Open for comment; 0 Comments.

Business Research that Makes for Smarter Public Policy

by Michael Blanding

Just as researchers in the life sciences often target their work to tackle the most dangerous diseases, business scholars are using their research to make a difference in government policy. Open for comment; 0 Comments.

An Economic Principle For Us All: Comparative Advantage

Re: David A. Moss

In an update to his popular A Concise Guide to Macroeconomics, David Moss explains how the state of the macro economy affects managers, executives, students—and all the rest of us. In this excerpt, Moss illuminates David Ricardo's theory of comparative advantage. Closed for comment; 0 Comments.

Studying How Income Inequality Shapes Behavior

by Michael Blanding

Professor David A. Moss is studying how growing income disparity affects our decision-making on everything from risk-taking to voting. Closed for comment; 0 Comments.

Reversing the Null: Regulation, Deregulation, and the Power of Ideas

by David Moss

Who's to blame for the recent financial crisis? To some extent, the fault lies with scholars of economics, according to professor David Moss. In this paper, he argues that an academic focus on government failure in the second half of the 20th century led to the general idea that less was always more when it came to regulation--which, in part, contributed to the crisis. To that end, he calls for a fundamental shift in academic research on the government's role in the economy. Key concepts include: By shifting their focus from market failure to government failure, late-20th-century scholars of economics helped create the impression that government can't get anything right. This helped set the stage for a widespread deregulatory mindset. This mindset was important in helping to eliminate unnecessary regulation, but it also hampered the creation of vital new regulation--including regulation of the largest and most "systemically significant" financial institutions--that might have prevented the financial crisis in the first place. The existing null, that government is perfect, has prompted a great deal of work on government failure. Now, Moss suggests, it's time for scholars to try to gain a deeper understanding of when government succeeds and under what conditions. How can well-known sources of government failure, such as regulatory capture, be prevented or minimized? To get there, he says, scholars need to adopt a new null hypothesis--namely, that government always fails. As scholars go about trying to reject that null, they are likely to generate valuable new research on government and regulation, including what works, what doesn't, and why. Closed for comment; 0 Comments.

HBS Faculty Debate Financial Reform Legislation

by Staff

Harvard Business School professors Robert Steven Kaplan, David A. Moss, Robert C. Pozen, Clayton S. Rose and Luis M. Viceira share their perspectives on the Dodd-Frank Wall Street Reform and Consumer Protection Act, slated to be signed this week by U.S. President Barack Obama. Key concepts include: Overall, faculty see reasons for optimism as well as concern and caution. We need appropriate risk-taking and credit extension to fuel economic growth, says Robert Steven Kaplan. While the Dodd-Frank bill creates safeguards, will it discourage and impede these activities? According to David A. Moss, an open question is how the regulators will use the new authority granted to them. The Dodd-Frank bill fails to reform large mortgage finance institutions such as Fannie Mae, Freddie Mac, and the housing agencies, says Robert C. Pozen. While the bill does tackle some causes of the crisis, says Clayton S. Rose, it may increase risk to the U.S. financial system by skirting the issues of firms "too big to fail" and the excessive use of market-based short-term funding by financial firms. At first sight, Dodd-Frank has elements that indicate we are moving in the right direction, while other parts of the bill leave us uncertain about its future success, says Luis M. Viceira. Closed for comment; 0 Comments.

A Macroeconomic View of the Current Economy

by Sean Silverthorne

Concerned or confused by the economic environment? Take some lessons from history and concepts from macroeconomics to get a better understanding of how the economy works. A Q&A with HBS professor David A. Moss, author of A Concise Guide to Macroeconomics: What Managers, Executives, and Students Need to Know. Closed for comment; 0 Comments.

Business Summit: The Role of Business Leaders in Sustaining Market Capitalism

Re: Multiple Faculty

Business leaders at the HBS Business Summit agreed on the threats to capitalism, but offered different opinions on the way forward. Closed for comment; 0 Comments.

“Too Big To Fail”: Reining In Large Financial Firms

by Roger Thompson

Four little words have cost U.S. taxpayers dearly in government bailouts of once-mighty Wall Street firms. Congress can put an end to such costly rescues, says HBS professor David A. Moss, and the Federal Reserve could be a super regulator, adds senior lecturer Robert C. Pozen. But will Congress enact the regulatory cure that is required? From the HBS Alumni Bulletin. Key concepts include: No firm should be too big to fail. The federal government should slap tough new regulations on all firms that pose "systemic risk"—the risk that a failure of one institution could wreak havoc across the entire financial system. The majority of financial firms that pose no systemic risk should face relatively light regulation, ensuring their continued dynamism and innovation. Not everyone on the politically divided Congressional Oversight Panel agrees with Moss's analysis and recommendations. The general concept of regulating systemic risk has gained broad support from a wide range of influential economists, lawmakers, and interest groups. Closed for comment; 0 Comments.

An Ounce of Prevention: The Power of Public Risk Management in Stabilizing the Financial System

by David A. Moss

The present financial crisis should remind us that private financial institutions and markets cannot always be counted upon to manage risk optimally on their own. Almost everyone now recognizes that the government has a critical role to play—as the lender, insurer, and spender of last resort—in times of crisis. But effective public risk management is also needed in normal times to protect consumers and investors and to help prevent financial crises from starting in the first place. According to HBS professor David Moss, the biggest threat to our financial system today is posed not by commercial banks (as in 1933), but rather by systemically significant institutions (outside of commercial banking) that have the potential to trigger financial avalanches. The threat posed by these financial institutions is only compounded by the unprecedented federal guarantees introduced in response to the current crisis and the pervasive moral hazard they spawn. Under the system that Moss proposes, no financial institution would be too big to fail. Key concepts include: Ensure financial stability in the future by identifying and regulating systemically significant institutions on an ongoing basis, before crisis strikes. The biggest risk management problem we face today in the financial sector is not commercial banks, but rather systemically significant institutions that pose a threat to the broader financial system (because of their size and interconnectedness) and, as a result, carry implicit federal guarantees. The fifty years of relative financial calm that followed the Glass-Steagall Act of 1933, the Securities Exchange Act of 1934, and the Banking Act of 1935 strongly suggest that sound public risk management can make a positive difference. To the extent that systematically significant financial institutions will receive federal support in the event of a general financial crisis, such support should be formalized (and paid for) in advance. Although all government guarantees can generate moral hazard, implicit guarantees are often the worst kind. Closed for comment; 0 Comments.

Podcast: Preventing Future Financial Failures

Re: David A. Moss

Professor David Moss says we need ongoing federal regulation of the few "systemically significant" institutions whose demise could threaten financial stability. Closed for comment; 0 Comments.

Financial Crisis Caution Urged by Faculty Panel

by Martha Lagace

Dean Jay O. Light and a group of Harvard Business School faculty explored the origins and possible outcomes of the U.S. financial crisis at a recent "Turmoil on the Street" panel. Closed for comment; 0 Comments.

Does Market Capitalism Have a Future?

by Garry Emmons

Does capitalism have a future? That intriguing topic was the subject of an HBS faculty colloquium led by professor Joe Bower, with fellow faculty members Dutch Leonard, David Moss, and Lynn Pain. Closed for comment; 0 Comments.

The Role of Government When All Else Fails

by Laura Linard

A new book by Harvard Business School professor David A. Moss explores government's under-appreciated role as risk manager in everything from disaster relief to Social Security. How did this role evolve into something today that touches on almost every aspect of economic life? Closed for comment; 0 Comments.