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    Offices in Europe

    © 2010 International Monetary Fund

    Typesetting: Alicia Etchebarne-Bourdin

    Cataloging-in-Publication Data

    Leruth, Luc E.

    The crisis and Miss Emily’s perceptions/L.E. Leruth and Pierre J. Nicholas.—Washington, D.C.: International Monetary Fund, 2010.

    p. ; cm. –

    At head of title: Offices in Europe.

    Includes bibliographical references.

    ISBN-13: 9781462327331

    1. Global Financial Crisis, 2008—2009. I. Nicholas, Pierre J. II. Faulkner, William, 1897—1962. Rose for Emily. IIII. International Monetary Fund. IV. Title.

    HB3717 2008 .L47 2010

    Disclaimer: This publication should not be reported as representing the views or policies of the International Monetary Fund. The views expressed in this work are those of the authors and do not necessarily represent those of the IMF, its Executive Board, or its management.


    The paper makes an analogy between the theme and the characters in Faulkner’s short story “A Rose for Emily” and the current crisis. Essentially, in Faulkner’s story, all the characters try to deny realities and, in doing so, allow an unstable equilibrium to last longer than it should have (hidden in her home, the respectable Miss Emily does strange things indeed, including not paying taxes).

    The paper, after briefly reviewing the literature on perception biases, argues that all economic actors have, to some degree, been refusing to face realities and that has helped the crisis to unfold:

    • Academics, because they want neat models, often at the cost of realism (the paper uses the example of the “representative agent”: individual behaviors cannot always be aggregated);

    • The private sector, because analysts relied excessively on instruments (like value-at-risk, VaR) that were not designed to remain valid in the case of a structural collapse or because some CEOs created smoke screens (Madoff);

    • The public sector, because, as some observers (e.g., Stiglitz) have argued, there was excessive confidence in economic theory, including in monetarism and in the power of markets to solve everything, even to self-regulate (the paper also quotes a recent piece by Kay in the Financial Times on the fate of the Glass-Steagall Act);

    • The public at large, because, to some extent, it benefitted from the bubble and fed it (thus, it is not only a victim, it is also an actor), while having a tendency to believe blindly the lines it is fed (e.g., by Madoff).

    The paper (designed to provide some scientific evidence while remaining a pleasant read) concludes that a Faulkner of economics and finance would be most useful since, like the characters in the short story, economic actors often have visions, whereas what would be required in these difficult times is someone (like Faulkner) with a vision: not the same thing.

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