Basically, no one knew what would happen when Lehman Bros. was allowed to fail. If enough people in economics and finance understood the interplay amongst derivatives, no one would have permitted Lehman to fail.
Our modern shaman, the economist garbed in a button down shirt, consults his models the way his ancient predecessor examined the stars. The economist looks at indicators; the shaman spills the blood of a goat and prods the entrails. Both the modern and the ancient look for the same thing, a clue to forces about which he possesses no direct knowledge.
The scientific method excised much of shamanic practice, and clinicalized the remainder. Will there be a time when humankind looks back at our era with a sense of patronizing pity, wondering at how we relied on the solo ignorant economist to divine our fortune?
Tuesday, December 9, 2008
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