Princeton University is responding to the nation’s increasing debt and failing economy by creating a new research and teaching center that will focus on public policy and its impact on financial markets.
Markus K. Brunnermeier, the university’s Edward S. Sanford professor of economics and scholar on financial markets and macroeconomics, is the first director of the new Julis-Rabinowitz Center for Public Policy and Finance. The center is scheduled to open this spring and was made possible by a gift from Mitch Julis, Class of ’77. Julis heads Canyon Capital Advisors, an asset management firm based in Los Angeles.
”The new center will provide our students and faculty, as well as the larger scholarly community, with much needed tools to analye and improve our nation’s financial and public policies in the wake of the worst economic crisis since the Great Depression,” said University President Shirley M. Tilghman.
Brunnermeier notes there is an imbalance of knowledge between members of the financial community and government agencies. As a result, decisions are often made without adequate knowledge, resulting in problematic outcomes. This is especially common with decisions involving municipal bonds, he said.
”There are many questions policy makers have to be familiar with in (regard to) financial decision making, and it should not be the case that there is a balance only towards Wall Street, and on the other side municipalities don’t have the same knowledge as on Wall Street,” Brunnermeier said.
The center’s goals, he added, are designed to improve this situation by bringing teaching about financial policy closer to public policy students (future leaders) at Princeton and more generally to regulators and central bankers, Brunnermeier added. Other goals include collecting data and research across multiple disciplines to encourages a more holistic approach to understanding the juncture of financial decision making and public policy.
”We want to have better financial decision-making vis-a-vis at the level of policy makers, but also around behavioral biases on behalf of certain decision makers,” Brunnermeier said.
One of the center’s first initiatives is an ongoing lecture series, co-sponsored with the Woodrow Wilson School of Public and International Policy, which brings distinguished leaders to Princeton to discuss economic issues. The series, entitled “Economic Recovery: Perils, Politics and Possibilities,” began in early October and has already featured speakers such as Axel Weber and Gregory Minkiw. Weber recently stepped down from his post as president of Deutsche Bundesbank (Germany’s equivalent of the U.S. Federal Reserve Bank) and next year is poised to join the world’s second largest private investment and wealth management firm, UBS AG in Switzerland. Weber currently teaches at the University of Chicago. Minkiw is the economic advisor to Mitt Romney’s 2012 presidential campaign and former chair of the Bush administration’s Council of Economic Advisors. He is also teaching, as an economics professor at Harvard University.
Brunnermeier’s appointment and the center’s opening comes at a time when the U.S. economy is struggling with abnormally high deficits, high unemployment levels and populist support for the Occupy Wall Street movement protesting huge financial gains in private industry. The center’s opening, however, has been in the planning stages for several years and is not related to the movement.
Brunnermeier’s expertise involves research on financial markets, systemic risk, and issues in macroeconomy.
”I work on bubble formations and what develops ahead of a crisis,” he said, ”and on the illiquidity problem that led to this huge amplification with the sub-prime mortgages bringing down a large part of the real economy.”
Brunnermeier’s international network of government, market and publishing affiliations include positions with the U.S. Federal Reserve Bank, the International Monetary Fund, the Center for Economic Policy and Research and the National Bureau of Economic Research. He is an associate editor with the American Economic Review and the Journal of the European Economic Association, and he previously served on editorial boards for the Review of Financial Studies and the Journal of Financial Intermediation.