Queen Elizabeth, economists and the financial crisis

Luis Garicano shows Queen Elizabeth II a chart explaining how the credit crunch was caused. (Kirsty Wigglesworth/Press Association Archive)

On November 4, 2008, Queen Elizabeth visited the London School of Economics for the opening of a new building. While there she was given an explanation on the origins and effects of the global financial crisis. At the end of briefing the Queen asked only one question: “Why did nobody notice it?” Professor of Economics Luis Garicano, director of research at the LSE Management Department, replied: “At every stage someone was relying on somebody else and everyone thought they were doing the right thing.” (The Telegraph, 5 November and Daily Mail, 6 November, 2008).

Eddie Mulholland – WPA Pool

During her visit to the Bank of England’s gold vault in December 2012, the Queen inquired whether the UK Financial Services Authority “did not have the teeth” to respond to the crisis. A senior economist Sujit Kapadia from the Bank’s financial services committee gave the Queen three explanations why the crisis happened. It was rare event which made it difficult to predict, he said. The second, as he phrased it: “people thought markets were efficient, people thought regulation wasn’t necessary. Because the economy was stable there was this growing complacency.” Thirdly, added Kapadia, “people didn’t realise just how interconnected the system had become.” (BBC, 13 December, 2012)

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