Taking the L-I-E Out of Libor

July 26, 2012

A new one from Schoenholtz and White:

The revelations by Barclays probably spell doom for the London interbank offered rate in its present form.   How to fix it?  Wherever feasible, benchmarks for financial contracts should derive from actual transactions, not surveys.

More at Bloomberg View.

The issue is a general one.  We have surveys for all kinds of things, but many economists think that none of them are as reliable as what people do when their own money is at stake.

Update (Jul 31):   the op ed made Ezra Klein’s top 5 list.


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