The Culture of Blame Game

There’s at least one person who doesn’t think economists deserve all the blame for the economic crisis. Harold James says other academic disciplines and “a cultural climate that pushed experimentation and the rejection of traditional values” contributed “at least as much”: A financial crisis letting us unmask deceit; but whose deceit?, by Harold James, Commentary, Project Syndicate: Now that the economic crisis looks less threatening (at least for the moment),… an ever more encompassing blame game is unfolding. The financial crisis provides an apparently endless opportunity for unmasking deceit, malfeasance, and corruption. But we are not sure quite who and what should be unmasked.

Leading bankers were initially the most obvious culprits. … They appeared arrogant and overpaid, and were easily demonized. But what about the political process? Why were the banks not more closely controlled and better regulated? … Governments are now vulnerable, and politicians are under attack almost everywhere. …

Today the attacks are not limited to the political and financial establishment. Critics are trying to identify the ideas as well as the interests that were responsible for financial and economic dysfunction. …

Since it is an economic crisis, most people seeking its intellectual roots are tempted to begin with economists… The founder of the rational expectations revolution, Robert Lucas, is endlessly quoted as having stated in 2003 … that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.” …

Other academic disciplines have looked rather smugly at … their colleagues in economics. The non-mathematical appear to have their revenge, as the perils of over-reliance on complex symbolic notation and arcane formulae are relentlessly exposed.

In fact, developments or fashions in other academic disciplines and also in the general culture contributed at least as much to a willingness to engage in absurd risks and to provide and accept valuations of complex and inherently unfathomable securities. The general cultural developments are sometimes termed post-modernism, which involves the replacement of reason by intuition, feeling, and allusion.

But post-modernism has itself been generated by technology, with which it has a deeply ambiguous relationship. In contrast to a steam engine or an old-fashioned automobile, whose operations were easily comprehensible, modern automobiles or airplanes are so complicated that their operators have no idea how the technology they are using actually works. …

Post-modernism moves away from the rational culture of the so-called “modern era.” Many people are finding more analogies with medieval life, in which humans were surrounded by processes that they found difficult to comprehend. As a result, they thought they lived in a world populated by demons and mysterious forces.

The recent era of global finance … differed from the financial surge of a century ago. Its cultural manifestations also appeared to be novel. It was playful, allusive, and edgy – in short, post-modern. …

An alliance was formed between financial experts who thought they were selling truly innovative ideas, a political elite that endorsed the philosophy of “regulation lite,” and a cultural climate that pushed experimentation and the rejection of traditional values. The result was that every sort of value – including financial values – came to be seen as arbitrary and fundamentally absurd.

When incomprehension no longer produces new heights of prosperity, but rather economic collapse and failure, it is not surprising that it turns to anger. Finding out who is to blame becomes more and more like the late medieval and early modern search for witches: a way of making sense of a disorderly and hostile universe.

I don’t really buy the explanation that an erosion of culture played a big role in the crisis, and even if it is to blame the post-modernism explanation seems suspect to me (e.g. believing that scientists, engineers, and so on understand things even if you don’t is different than believing things are driven by mysterious forces that nobody understands even if, in the end, the faith in the scientists and engineers was misplaced). What do you think?

Originally published at Economist’s View and reproduced here with the author’s permission.

2 Responses to "The Culture of Blame Game"

  1. Anonymous   June 9, 2009 at 3:02 am

    One should realize that capital is and always will be insufficient in this planet (in light of badly needed infrastructure in many places.) A global savings glut before the crisis is a fallacy. Have we had many more suitable jurisdictions to allocate capital in medium/long term projects, capital in the form of credit would never be enough to distress consumers in America as of now.

  2. Anonymous   June 19, 2009 at 9:12 am

    Not postmodernism, but digimodernism.