Class examines financial crises of the past and present

Professor Tim Kehoe calls the class, which uses economic models to analyze financial meltdowns, “an experiment.”

by Danielle Nordine

While the country faces serious financial crises both at home and abroad, University of Minnesota economics professor Tim KehoeâÄôs class is taking a hands-on approach to understanding the reasons for these crises. The course, called Current Economic Issues , focuses on global financial meltdowns throughout history, including the Great Depression and the current financial crisis, from an economics point of view. This is the first time this class has been taught. âÄúThis is an experimental kind of course,âÄù Kehoe said. âÄúWeâÄôre pushing the students to think about these issues at a higher level.âÄù In the class, the students have worked with economic models on computer software and have not only learned the math behind economic theories, but are discussing the ideas and concepts as well. âÄúIn class, weâÄôre applying theory to the current crisis,âÄù Kimberly Conlon, an economics senior, said. âÄúWeâÄôre looking at global crises and how theyâÄôre similar to ours, and what actions they took to get out of the situation.âÄù Kehoe said they spend time discussing current financial crises in other countries as well as the history surrounding the Great Depression and other U.S. financial crises. âÄúItâÄôs more relevant than you think,âÄù he said. During a recent class, students discussed a wide variety of issues surrounding what causes financial crises and what turns them into depressions. âÄúThis kind of panicky response to financial issues weâÄôve seen with TARP and such is what makes depressions worse, not better,âÄù Kehoe said. âÄúYouâÄôre going to be paying for it for the rest of your lives.âÄù Students also debated whether or not the financial crisis was over. While some students argued that employment was still far below where it should be, Kehoe and others pointed out that employment takes a long time to rebound but the economy is improving. Kehoe said people need to learn from the Great Depression and other financial crises in order to fix the current situation. âÄúThatâÄôs the message I hope these students are getting from this course,âÄù he said. Economics senior Alyssa Tucker said she was drawn to the class because of the title and the idea behind it. âÄúâÄòCurrent economic issuesâÄô âÄì that spurred my attention, because itâÄôs not something we really focus on in other classes,âÄù she said. On Tuesday morning, the class of about 25 students took a trip to the Federal Reserve Bank of Minneapolis to meet with Nobel Prize-winning economists Edward Prescott and Robert Lucas. âÄúIt was an incredible opportunity, to say the least,âÄù said Philip Zeller , a senior economics student. âÄúWe are really lucky.âÄù Lucas and Prescott outlined economic theories while applying them to the current financial crisis, but approached the issue from two opposite angles. âÄúI wish we could have heard them debate each other more,âÄù Zeller said. Students said the talk meshed well with what they had been learning in class about different economic theories surrounding the recent recession, including whether government spending and tax cuts will stimulate the economy and what was to blame for the financial crisis in the first place. Before the talk, the students got a chance to tour the board of directorsâÄô room at the Fed and admired the panoramic view of the city. Kehoe told the class: âÄúIf you become a rich banker, someday you could be sitting in these seats.âÄù