Rethinking Markets

The movie you should see this season is Inside Job. It is a documentary about the 2008 financial crisis, examining its causes, the mechanisms by which it was perpetrated, the apologists and academic architects, and the after-effects. The press kit (a .pdf) is worth examining, here is the NYT review, here is Felix Salmon’s take.

I was initially a bit worried, since I went with a colleague in my department, whose expertise is not finance and whose grasp of the financial crisis was layman-fuzzy. But she understands a lot more about what happened. Don’t be put off because you don’t know your CDS’s from your CDO’s. It’s as clear as anything I’ve seen or read or heard about the crisis, including my favorite, the Giant Pool of Money (really, take an hour and go listen to that). The movie works on a lot of levels, and it is incredibly satisfying, for a number of reasons. Most importantly I think, the director (Charles Ferguson) treats the crisis a result of people doing stuff. It’s not just disembodied institutional actors. It is absurdly highly paid people perpetrating fraud and negligence; it is regulatory overseers failing not just failing to do their jobs but actually making many people’s lives worse in order to enrich a small number of finance folks; it is academics who max out on a clueless/self-importance 2×2 to a shocking degree.

That no one has been prosecuted is such an outrage. And because we’re usually treated to the usual high-rolling assholes getting the microscope (which they do get here, and how), I am glad to see that a number of financial economists in government and in the private sector also get served a good helping of scorn. If there is justice they will be remembered in history as amoral apologists and intellectual architects of a stupid and corrupt financial system. To have so much to say, and yet so little to say. I would be ashamed to be an economist working in finance. The entire discipline is tainted by these (possibly) few people. Frederic Mishkin’s moment comes when, after being asked a tough, non-fawning question about how to justify not disclosing his financial ties to entities who have a direct stake in his research, sneered “you’ve got three minutes…take your best shot.” Lawrence Summers comes off as a horrible, horrible person. So does Martin Feldstein. Columbia and Harvard Business schools, rather than taking up a defensive stance (which I predict they will do), should take this as an opportunity to do a little soul searching. To this smug little corner of the academic world, I honestly can only say: shame. Shame.

I’m also mostly devastated by how little economic sociology has to say here. I say this, knowing that Donald MacKenzie is coming to town pretty soon to talk about electronic trading and the financial crisis: a sociological perspective. The thing is, you know how you think the thing you’re studying is about one thing, but turns out to be not about that at all? That’s what is happening here. It’s not performativity, or embeddedness, or social movements, or cultural institutionalism. It might be a little about these things, but all around the edges. The financial crisis is about fraud, and greed, and a naked power grab. Economic sociology should pick up The Power Elite.

As you can see, the film has got me riled up. It’s not a perfect movie, but if the powers that be can please get it into more than two movie theaters, it would certainly be worth your time.