“Astrology developed into a strange discipline – a mixture of careful observations, mathematics and record keeping – with fuzzy thinking and pious fraud.”
- Carl Sagan, from the TV series ‘Cosmos’.
The late Carl Sagan was talking about astrology, but with those references to observation, mathematics, record-keeping, fuzzy thinking and outright fraud, he might just as well have been referring to economic theory. Or banking, for that matter. Magical thinking masquerading as knowledge – with hypotheses stolen from the physical sciences – is just one of the factors behind a financial crisis that, contrary to popular opinion, lives with us still, slowly continuing to drip poison into the real economy.
Another factor, which we suggest
has been less closely examined, is the role of ownership and management. In an
outstanding book (“The Puritan Gift – reclaiming the American dream amidst
global financial chaos” by Kenneth and William Hopper; I.B. Tauris & Co,
2009) the authors make a convincing case that it was bad management and
deviation from the long-established principles of innovation and discipline
that were / are really at the heart of the banking crisis. The Hoppers define
the Puritan Gift as “a rare ability to create organizations that serve a useful
purpose, and to manage them well.” As opposed to organizations that serve no
useful purpose, and managing them into the ground. Lehman Brothers, anybody ?
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