Faith & Economics
NUMBER 58, Fall 2011
A Spiritual Response to the Financial Crisis? Making Decisions for the Really Long Run
Charles W. Calomiris
Columbia University and NBER
Abstract: After outlining the multiple causes of the recent financial crisis (monetary policy, housing policy, the deliberate underestimation of risk in financial markets, and regulatory failures to identify the risks of subprime lending), and suggesting a policy response (policy interventions to restore asset prices to their long-term values, combined with measures to address long-term design flaws in the regulatory system), this article reflects on spiritual responses to the crisis. Proper responses to any crisis, including a financial crisis, require both internal reflection and prayer, and external action grounded in reflection. The quality of the decisions we make as individuals and as a society will depend on our capacity to learn from suffering, our humility in understanding and shaping our world, our ability to remain faithful and hopeful, and our commitment to act as true witnesses.
JEL: A11, A13, G18
Key Words: financial crisis, financial regulation, financial policy, spirituality, religion.