Academic Conferences

November 20-21, 2015

The Crisis in the Economic Theory of the Firm

The conference grows out of conversations about what happens to the standard theory of the firm when we incorporate the fact that firms are not only economic actors but political actors as well. The premise of the current economic theory of the firm is profit seeking; but even Milton Friedman assumed that "the basic rules of the game" are off limits to firms' profit agendas. However, a growing body of literature, including in business fields such as accounting and finance, has shown that these rules of the game are often influenced–and perhaps sometimes even shaped–by firms wishing to extract private benefits. This raises at least two questions: Is it socially optimal for firms to maximize profits by changing the rules of the game through political lobbying and related activity? If not, what does this mean for the theory of the firm–and the maxim of "shareholder-value maximization"–in a world of expansive corporate political activity?

May 15, 2014

30 Years After the Failure of Continental Illinois Bank: Have We Solved Too Big to Fail?

A conference organized by the Stigler Center of the University of Chicago’s Booth School of Business with financial support from The Clearing House.

One day conference to analyze the impact of the Continental Illinois Bank’s failure and bail-out in 1984 on the development of “too big to fail” in the US and the subsequent regulatory, supervisory, and market changes that have affected expectations about perceptions of government support.

Background: On May 17, 1984, regulators took over the failing Continental Illinois Bank, one of the ten largest banks in the US at the time. The government provided complete protection to all depositors and liability holders against loss. When questioned about the intervention in a congressional hearing the following September, the comptroller of the currency said that roughly the largest 11 banks in the US would receive the same treatment if they were in trouble. This became the modern origin of “too big to fail” in the US. Concerned about the moral hazard problems and unequal treatment, Congress and regulators worked to change the perceptions of government support through various regulatory actions and the passage of FDIC Improvement Act of 1991. The 2010 Dodd-Frank Act contains a number of provisions aimed at mitigating “too big to fail” and debate continues about their implementation and effectiveness. The conference speakers will contribute to this important policy debate.

Panel One

Panel Two

Panel Three

See agenda for more information.