Eric S. Maskin, the 2007 Nobel Laureate in Economics and Adams University Professor of Economics and Mathematics at Harvard, delivered the keynote address at the SAIF Distinguished Speaker Series on June 16th at the Xuhui Campus. Speaking on the theme “Financial Crises: Why They Occur and What to Do about Them,” Professor Maskin offered insights on the evolution of global financial risk, banking system resilience, and modern financial governance.
Co-hosted by SAIF and the SAIF Hong Kong Foundation, the event drew nearly 300 SAIF faculty, students, alumni, and guests. Professor Shijun Cheng, SAIF's Executive Dean and Chair Professor of Accounting, welcomed the audience, and Professor Jie Hu, Professor of Practice at SAIF, moderated the discussion.
Among the most influential economists of his generation, Maskin has made landmark contributions to game theory, contract theory, social choice, political economy, and mechanism design — the last of which earned him the 2007 Nobel Prize. His work provides foundational frameworks for market regulation, resource allocation, public policy, and financial governance.
Maskin opened by revisiting the Great Depression and the 2008–09 Global Financial Crisis, noting that both were marked by bank failures that triggered systemic contagion. Such crises, he stressed, are not inevitable: sound policy and regulation can prevent both their occurrence and their spread.
He then drew a contrast between credit markets and ordinary goods markets. While ordinary markets self-correct through price adjustments, credit markets underpin corporate investment, payroll, and innovation — so their malfunction can quickly trigger economy-wide turbulence, given the strong spillover effects and systemic risk involved.
Setting aside the conventional emphasis on irrationality or moral lapses, Maskin identified leverage and negative externalities as the core causes of financial crises. High leverage boosts returns but magnifies risk, and a single bank's risky lending imposes costs on the entire system — a misalignment that market self-governance alone cannot correct, and that requires government intervention.
Turning to crisis governance, Maskin distinguished between emergency bailouts, which come after a crisis, and preventive regulation, which comes before one. Liquidity injections can halt contagion but foster moral hazard; ex ante measures such as capital requirements, leverage caps, and stress tests are more fundamental, reducing the probability of crisis at its source. He emphasized that precisely calibrating leverage ratios — rather than simply capping bank size — does more to strengthen systemic resilience.
Maskin closed his keynote by tracing the evolution of global financial regulation. The framework built after the Depression preserved stability for decades, but gradual deregulation allowed risks to accumulate. Many countries tightened leverage and capital-adequacy rules after 2008, he noted, reiterating that prudential oversight remains essential and that abandoning it will inevitably invite repeated crises.
In the dialogue session that followed, Maskin addressed several current issues, including financial risk prevention, macroeconomic monetary policy, artificial intelligence, and the Chinese market. Reflecting on the Federal Reserve's record, he observed that its contractionary policy deepened the Depression-era downturn, while its swift liquidity provision in 2008 contained cross-sectoral contagion; he also pointed to the Dodd-Frank Act's stress tests as pivotal to strengthening U.S. financial stability.
Asked about artificial intelligence, Maskin predicted productivity gains alongside employment restructuring. He advised young people to cultivate problem-solving, analytical, and continuous-learning skills rather than rigid career plans, and argued that education should build transferable cognitive abilities so graduates can adapt as industries change.
