There are several observations to be made
from the number and variety of narratives
that the authors in this review have proffered.
The most obvious is that there is still significant
disagreement as to what the underlying
causes of the crisis were, and even less agreement
as to what to do about it. But what may
be more disconcerting for most economists
is the fact that we can’t even agree on all the
facts[...]Many of us like to think
of financial economics as a science, but complex
events like the financial crisis suggest
that this conceit may be more wishful thinking
than reality. Keynes had even greater
ambitions for economics when he wrote, “If
economists could manage to get themselves
thought of as humble, competent people on a
level with dentists, that would be splendid.”22
Instead, we’re now more likely to be thought
of as astrologers, making pronouncements
and predictions without any basis in fact or
empirical evidence.
I find it kind of sad that the author is more concerned with lamenting about what people think of him and his profession than he is preoccupied with synthesizing the most plausible set of causes and remedies for the financial crisis from the 21 different sources he has studied.
I think the point being made is that it's not straightforward to synthesize a plausible set of causes and remedies, despite the survey of 21 sources, and that economics as a science needs a bit of self-reflection in the light of this reality.
The author's main conclusion is that economists "need to collect, check, and accumulate facts from which more accurate inferences can then be drawn. Without the immutable hard platform of objective facts on which we
can build an accurate narrative of the crisis
that stands the test of time, there’s little hope
for scientific progress as the waves of public
opinion toss our perspective in one direction
or another."
I don't need a degree from Harvard and Yale, nor do I need to be a professor at MIT to tell you that.
If I were an expert in Professor Lo's position, I would probably make a greater attempt to present my expert view of the events and my expert recommendations based off of the 22 texts that I have just read on the subject, rather than just saying that we should collect more data on everything so that this won't happen again in the future.
If the data sucks, how are you going to present any other reasonable expert view than the one he presented? Manufacturing some grand view and recommendations based on untrustworthy data is something that needs to be avoided, however much we would want to hear it.
I'd love to hear the opinion and recommendations of the guy who read 22 primary/secondary texts on the subject and have him help shape policy now. You're not going to get better data than the expert views and analyses presented in these texts, barring the constant surveillance, recording, and analysis of every transaction ever made within and without the US economy, every email sent within and between banks/regulators/credit rating agencies/mortgage brokers/loan originators, etc. - data that is impractical and currently illegal to collect.
We'd all love to have more/better data, but that doesn't mean we shouldn't draw conclusions or act on the data that is available to us now.
Not sure why author is confused. Here's how it went down:
- Congress needed votes
- Easiest way to get them is to be a populist
- The tool: Everyone should be able to buy a home
- The approach: Remove red tape
- Why demand that people actually prove income?
- Both major political parties at fault
- Lenders, well, start lending
- Government guarantees any loan
- A McDonalds worker can buy a $500K home
- No-docs, zero down, interest-only loans invented
- Wall street help is needed to write more loans
- Collateralized Debt Obligations (CDO) invented
- Now we can loan to even more non-qualified buyers
- Now people can invest in loans made to non-qualified buyers
- Mutual funds jump in
- What could go wrong? It's a party.
- Thanks US Congress!
- The frenzied environment takes to new heights
- Every institution working under the law
- This is what Congress wanted
- Happy people buying homes
- Well worry about affordability later
- Gimme your votes
- Valuations went insane
- And then the music stopped
- Eventually the McDonalds worker had to face the
fact that he/she owed $500K
- People bought $1.5 million dollar homes and woke
up to their mortgage payment quadrupling overnight
- Chain reaction of defaults
- CDO's were hot potatoes nobody wanted
- Mutual funds imploded
- Municipalities invested in CDO's went bankrupt
- Strategic defaults were invented
- Businesses and individuals went bankrupt by the millions
- Hundreds of thousands of jobs are lost every month
- The effect is international
- The US government picks winners and losers
- Banks and auto manufacturers are bailed out
- Politicians start to blame bankers and "greedy"
Wall Street brokers
- The lynching mob focuses on them in complete
ignorance of who truly triggered the entire mess
- Politicians got their votes while imploding the
world economy and came out looking good as they
talked about going after the "evil bankers"
- Of course, they didn't go after anyone because
there was nothing to go after
- Banks and Wall Street were operating under the
rules and laws passed by Congress
- It was a case of political collateral damage taken
to an extreme
- And almost every single one of them is still in office
The real cause was greedy politicians (not banks and Wall Street) and their use of populism as a tool.
A decidedly evil tool in the hands of politicians who take advantage of the uneducated masses for their own benefit.
Latin America is going through a bit of an awakening and a revolt precisely aimed at the massive destruction populism has caused in nearly every country south of the US. It's a disaster that will take decades, if not generations, to repair. While few seem ready to recognize it, we have exactly the same problem in the US.
A woman from Guatemala named Gloria Alvarez has emerged as one of the most vocal and intelligent figures in a multi-national effort to push back on populism.
Don't be led by the nose by politicians who only care about using you for their own benefit. As we have seen and as Latin American has seen, allowing populism to reign unchecked can have dire consequences.
In the US both parties are guilty of populism but the left has taken it to "expert level" over the last few years. The technique is to divide us by race, occupation, educational level, income and any other criteria they can find. You appoint an "enemy" for each divided class: whites vs. blacks, rich vs. poor, blue collar vs. white collar, etc. You focus the masses on the enemies and promise you will find solutions for their grievances.
7 comments
[ 3.1 ms ] story [ 31.8 ms ] threadI find it kind of sad that the author is more concerned with lamenting about what people think of him and his profession than he is preoccupied with synthesizing the most plausible set of causes and remedies for the financial crisis from the 21 different sources he has studied.
I don't need a degree from Harvard and Yale, nor do I need to be a professor at MIT to tell you that.
If I were an expert in Professor Lo's position, I would probably make a greater attempt to present my expert view of the events and my expert recommendations based off of the 22 texts that I have just read on the subject, rather than just saying that we should collect more data on everything so that this won't happen again in the future.
We'd all love to have more/better data, but that doesn't mean we shouldn't draw conclusions or act on the data that is available to us now.
A decidedly evil tool in the hands of politicians who take advantage of the uneducated masses for their own benefit.
Latin America is going through a bit of an awakening and a revolt precisely aimed at the massive destruction populism has caused in nearly every country south of the US. It's a disaster that will take decades, if not generations, to repair. While few seem ready to recognize it, we have exactly the same problem in the US.
A woman from Guatemala named Gloria Alvarez has emerged as one of the most vocal and intelligent figures in a multi-national effort to push back on populism.
https://www.youtube.com/watch?v=xkYEXS16dZA
Don't be led by the nose by politicians who only care about using you for their own benefit. As we have seen and as Latin American has seen, allowing populism to reign unchecked can have dire consequences.
In the US both parties are guilty of populism but the left has taken it to "expert level" over the last few years. The technique is to divide us by race, occupation, educational level, income and any other criteria they can find. You appoint an "enemy" for each divided class: whites vs. blacks, rich vs. poor, blue collar vs. white collar, etc. You focus the masses on the enemies and promise you will find solutions for their grievances.
And, just like that, you have masses will...