Sixteen years ago, two economists published a research paper with a delightfully simple title: "Looting." George Akerlof and Paul Romer argued that several financial crises in the 1980s had been the result of private investors taking advantage of the government. In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer said, would have operated in a completely different manner. The investors displayed a "total disregard for even the most basic principles of lending," failing to verify standard information about their borrowers or, in some cases, even to ask for that information. The investors "acted as if future losses were somebody else's problem," the economists wrote. "They were right."
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