Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

where you can subscribe, find other episodes, comment on this podcast, and find links to

other information related to today's conversation. Our email address is mailadicontalk.org. We'd

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Today is November 2nd, 2009, and my guest is Judge Richard Posner, Federal Judge, Senior

Lecturer at the University of Chicago Law School, and a prolific author. His latest book

is the subject of today's podcast, A Failure of Capitalism, The Crisis of 08 and The

Descent Into Depression. Judge Posner, welcome to Econ Talk.

Thank you.

You indict capitalism for the crisis, and you wrote your book. It came out, I think, in May

of this year. It was a very ambitious book to get it out so quickly, which you managed

to do, and you forecast the worsening of things at the time. So feel free to add any of those

worsenings along the way in our conversation, but what is the source of the problem in

your opinion?

I wouldn't say that I had indicted capitalism. I mean, it caused Paul the book, A Failure

of Capital. I think it is a failure, but it's a failure primarily of the governmental institutions

of capitalism, the central bank, the Federal Reserve, and the regulatory system for controlling

financial business. You need that. As I argue in the book, banking is an inherently risky

business, and so you have to have regulatory controls, and you have to have a central

bank that controls the money supply and interest rates, and so on, and that's all part of the

capitalist system. It's not just markets. It's a regulatory structure, governmental structure.

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