“Everybody seems to know that the crisis of 2008 and its aftermath are the most significant since the Crash of 1929 and the Great Depression that followed. What fewer seem to realize is that wealth and income inequality by 2008 also had reached levels not seen since ... yep, 1929!” says Robert C. Hockett, Professor of Law.
In “Income Inequality and Market Fragility: Some Empirics in the Political Economy of Finance,” a working paper co-authored with research assistant Daniel Dillon, Hockett argues that these parallels are no accident. First presenting strong empirical evidence of a statistically significant link between growing income and wealth inequality on the one hand and macroeconomic dysfunction on the other hand, the paper preliminarily corroborates the presence and operation of a specific mechanism that Hockett hypothesizes accounts for this relationship. The results, Hockett further suggests, bear implications for the project of financial regulation.
Hockett presented the findings (watch at 0:46:18) at “The Political Economy of Financial Regulation,” a major conference of renowned economists, regulators, lawyers, and political scientists held at George Washington University Law School on February 7 and 8.
The full paper is publicly available online at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2204710