Therefore, some economists, including John Geanakoplos, strongly argue that the Federal Reserve should monitor and regulate the system-wide leverage level in the economy, limiting leverage in good times and encouraging higher levels of leverage in bad times, by extending lending facilities.
The notion of constraint suboptimality was formalized by Geanakoplos and Polemarchakis (1986).
Geanakoplos' papers in the 1980s with Paul Klemperer and Jeremy Bulow developed the concept and invented the terminology of Strategic Complements that is now commonly used in game theory, industrial organization and elsewhere.
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Before the Late-2000s financial crisis, Geanakoplos was known primarily for his contributions to General equilibrium theory, particularly Incomplete markets in general equilibrium theory.
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He received his B.A. in mathematics from Yale University in 1975 (summa cum laude), and his M.A. in mathematics and his Ph.D. in economics under Kenneth Arrow and Jerry Green from Harvard University in 1980.
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