Chrystia Freeland

Sometimes, the aftermath is more devastating than the storm. That is the story of the 2008 financial crisis. It was disastrous at the time, but what has been worse is how long it has lingered. That halting recuperation is why the global economic meltdown is still at the center of the political debate in the Western world.

Much of the discussion is a replay of the familiar battle between the economists John Keynes and Friedrich Hayek: Is the solution stimulus or austerity? Amir Sufi, a professor at the University of Chicago Business School, has been doing provocative research that suggests we should be focusing on a different angle.

The real issue, in Mr. Sufi’s view, is where stimulus dollars should be targeted.

He believes the U.S. government made a costly mistake by focusing on bankers and not homeowners. Mr. Sufi’s argument matters, and not just because there will, inevitably, be another financial crisis. He thinks the intellectual bias that prompted the bailout of Wall Street but not Main Street risks derailing Europe’s recovery, too.

“In my view, excessive levels of household debt were the reason the recession was so severe,” Mr. Sufi told me, speaking by phone from Chicago. “If you look at the spending decline that drove the great recession, that was coming from the households.”

Nouriel Roubini is #12 on on Foreign Policy’s list of the 100 Top Global Thinkers of 2010. Over the past few years, the economist at New York University says he’s been thinking most about why financial crises occur and whey they are occurring more frequently than we have expected.

Contrary to the conventional notion that crises are random and infrequent events, Roubini has been arguing for the better part of a decade that financial crises can be predicted based on macroeconomic and policy mistakes. In fact, they occur every few years in some country around the world, he says. Roubini characterizes these financial crises as a “white swan” event. He emphasizes their regularity in his recent book Crisis Economics. Roubini says the pattern of crises is always the same: initially there is an economic boom, which drives up asset prices, leading to an excessive build-up of debt and leverage, which eventually leads to a downturn and then a market crash and bust.

The co-founder of Roubini Global Economics, Roubini credits his 20 years of experience studying financial crises in emerging markets — he published a book about their causes and consequences in 2004 — for enabling him to spot the risks for a crash. He also notes that others who foresaw the crisis, such as Morgan Stanley Asia’s Steve Roach and then-Merrill Lynch economist David Rosenberg, share a global view of economic dynamics, intellectual courage and a certain outsider status, a characteristic that fellow FP Global Thinker Mohamed El-Erian said was vital for his own success.