Alas, this is probably going to be another instance where the guilty are rewarded, as the bankers and businesspeople who nuked the economy have been by golden parachutes and bailout funds, and the innocent punished, namely the rest of us.
In academe, the economists will circle the wagons and angrily assert their hegemony against the people (heterodox economists, political scientists, skeptical analysts) who saw this coming, pushing the further to the fringes.
The market lunatics have already won in the Obama administration, witness the bailout, with the gangsters being given more zillions to throw after those they have already flushed. For once the market is semi-rational in not believing this will help, although the righteous (good companies that are well-managed and solvent) are punished along with the bad. The rain falleth upon the just and unjust alike.
Personally, I am coming to believe in the Chinese solution: nine grams in the back of the head, and they make the family pay for the bullet. I'd take every free market academic economist and everyone from the Senior VP level up at any company taking bailout money and just have them shot. No defense. No lawyers. No appeal. Maybe a little enhanced interrogation beforehand to get them to name names. Sentence carried out within a half hour of the special court's determination that they fall into the appropriate category. And I'd charge the families for the bullet.
Kill 'em all and let God sort 'em out.
I think it would have a salutary purging and deterrent, as well as an appropriately retributive effect, as well as ridding us of a lot of crooks, fraudsters, self-appointed masters of the universe, and other lowlifes.
--- On Wed, 3/4/09, Ira Glazer <ira.glazer at gmail.com> wrote:
> From: Ira Glazer <ira.glazer at gmail.com>
> Subject: [lbo-talk] Economists are the forgotten guilty men
> To: lbo-talk at lbo-talk.org
> Date: Wednesday, March 4, 2009, 3:44 PM
> http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article5663091.ece
> February 5, 2009Academics - and their mad theories - are to
> blame for the
> financial crisis. They too deserve to be hauled into the
> dock Anatole
> Kaletsky
>
> In the search for the “guilty men” responsible for the
> near-collapse of the
> global economy, one obvious group of scapegoats has escaped
> blame: the
> economists.
>
> By “economists” I do not mean the talking heads (myself
> included) employed
> by the media and financial institutions to “explain”,
> usually after the
> event, why share prices or currencies have gone up or down.
> Nor do I mean
> the forecasters whose computers churn out
> scientific-looking numbers about
> what will happen to growth or inflation, but whose figures
> are revised so
> drastically whenever something “unexpected” happens -
> as it always does -
> that their forecasts are really nothing more than
> backward-looking
> descriptions of recent events.
>
> What I mean by “economists” are the academic theorists
> who win Nobel prizes,
> or dream of winning them.
>
> To see why these seemingly obscure academics deserve to be
> hauled out of
> their ivory towers and put in the dock of public opinion,
> consider why the
> bankers, politicians, accountants and regulators behaved in
> the egregious
> ways that they have. It may be true that all bankers are
> greedy, all
> politicians venal, all regulators blind and all accountants
> stupid. But such
> personal failings do not explain their behaviour in the
> past few years.
> After all, bankers do not like losing money and politicians
> do not like
> losing power. All these “guilty men” behaved as they
> did because they
> thought it made sense.
>
> And why did these greedy bankers and stupid politicians
> hold beliefs that,
> in hindsight, seem so ludicrous and self-destructive? Why,
> for example, did
> they think it reasonable for a bank with just $1billion of
> capital to borrow
> an extra $99 billion and then buy $100 billion of
> speculative investments?
>
> The answer was beautifully expressed two generations ago by
> John Maynard
> Keynes: “Practical men, who believe themselves to be
> quite exempt from any
> intellectual influence, are usually the slaves of some
> defunct economist.
> Madmen in authority, who hear voices in the air, are
> distilling their frenzy
> from some academic scribbler of a few years back.”
>
> What the “madmen in authority” were hearing this time
> was the echo of a
> debate that consumed academic economists in the 1960s and
> 1970s - a debate
> won by the side whose theories turned out to be wrong. This
> debate was about
> the “efficiency” of markets and the “rationality”
> of the investors,
> consumers and businesses who inhabit them.
>
> On those two dubious adjectives “rational” and
> “efficient” an enormous
> theoretical superstructure of models, regulatory
> prescriptions and computer
> simulations was built. And without this intellectual
> framework, the bankers
> and politicians would never have built the towers of bad
> debt and bad policy
> that have come crashing down.
>
> I am not suggesting that the bankers who borrowed 50 times
> their capital to
> gamble on mortgage bonds or the regulators who allowed them
> to do it were
> consciously following academic theories. As Keynes said,
> these practical men
> had no interest in theories, which was why they left so
> many technical
> judgments to supposedly expert economists and consultants.
> What the
> practical men didn't realise, however, was that the
> risk management
> consultants who told them their banks would face no
> solvency problems and
> the economists who advised them that financial markets were
> always right
> were basing their analyses on two theories that were
> catastrophically wrong.
>
>
> These two theories - called “rational expectations” and
> “the efficient
> market hypothesis” - essentially assume that the economy
> is a predictable,
> comprehensible machine with a defined set of instructions.
> That in itself
> may seem preposterous, but the theory goes farther and
> assumes that every
> “rational” participant in economic life knows these
> instructions and assumes
> that everyone else knows them too. To make matters worse,
> it is then applied
> to financial markets so that any economically inexplicable
> gyrations that do
> occur are explained a way as purely random, like tossing a
> coin. This leads
> to the conclusion that financial prices, although they may
> fluctuate
> randomly in the short term, are highly predictable in the
> long term, in the
> same way that the takings of a casino are.
>
> Why did these implausible theories defeat more realistic
> ones? Partly it was
> the ideological mood of the 1980s and partly the ease with
> which rational
> expectations theories could be turned into mathematical
> models. By using
> these models, bankers and policymakers could be “blinded
> with science” - and
> even better from the standpoint of academic economists,
> their discipline
> could be elevated to the scientific status of physics.
>
> The impact on both economics and public policy has been
> dire. The obvious
> effect has been the reckless behaviour of bankers and
> regulators, who were
> told by reputable-sounding economists that the bankruptcy
> of Lehman Brothers
> could be expected only once every billion years or so even
> though similarly
> “impossible” events - such as the collapse of the LTCM
> hedge fund and the
> 1987 stock market crash - had occurred twice in the
> previous 15 years.
>
> Equally pernicious has been the stifling of intellectual
> debate among
> academic economists, who have spent the past 20 years
> arguing about the
> properties of their imaginary mathematical models rather
> than the behaviour
> of the real economy these models were supposed to describe.
>
> The question, not only for professional economists but for
> all those in
> politics and business who have relied on these ideas, is
> what will happen to
> economics now that its fundamental assumptions and
> mathematical models have
> been totally discredited by events.
>
> There seem to be only two options. Either the subject has
> to be abandoned as
> an academic discipline and becomes a mere appendage of the
> collection and
> analysis of statistics. Or it must undergo an intellectual
> revolution.
>
> The prevailing academic orthodoxy has to be recognised as a
> blind alley.
> Economics will have to revert to a genuine competition
> between diverse
> intellectual approaches - such as behavioural psychology,
> sociology, control
> engineering and the mathematics of chaos theory.
>
> So economics is on the brink of a paradigm shift. We are
> where astronomy was
> when Copernicus realised that the Earth revolves around the
> Sun. The
> academic economics of the past 20 years is comparable to
> pre-Copernican
> astronomy, with its mysterious heavenly cogs, epicycles and
> wheels within
> wheels or maybe even astrology, with its faith in star
> signs.
>
> The academic Establishment will resist such a shift, as it
> always does. But
> luckily economists understand incentives. They should now
> be given a clear
> choice: embrace new ideas or return their public funding
> and Nobel prizes,
> alongside the bankers' bonuses they justified and
> inspired.
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