I must be a masochist. I woke up yesterday morning and decided that I just couldn't NOT talk about the financial crisis in my classes. But since my own understanding of the crisis was pretty shallow, I proceeded to spend the next five hours reading everything I could find, bugging my colleagues and putting together a lecture for my Principles class at noon that tried to tie the crisis together with our recent discussions of cost-benefit analysis and incentives (if anyone is interested, the lecture is now on my iTunesU site - email me directly and I'm happy to send the link). I jumped forward in my syllabus and talked about moral hazard but I think it actually fit quite well with our previous discussions so I may even keep it there in the future. Of course, I have no idea what my students thought of my presentation but I'm glad I did it; this whole situation clearly has huge implications and even if most of my students aren't directly affected right now, they need to be aware of what's going on.
This morning, the Freakonomics blog has a post from Chicago economists Doug Diamond and Anil Kashyap that explains it all way better than I could (though they do assume a certain level of familiarity with financial markets that I'm not sure all my students have). And I could never share this with my students in class but this powerpoint show gives a hysterical, and fairly accurate, explanation too.
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