Efficient-markets theorists treated the 2008 crash as confirming their doctrine

Evidence

Eugene Fama, how the theory had fared in the crisis, Fama replied, “I think it did quite well in this episode.” When challenged by Cassidy, he responded, “We don’t know what causes recessions … We’ve never known.” When queried about the seemingly refuted Modigliani-Miller theorem, Fama responded: “The experiment we never ran is, suppose the government stepped aside and let these institutions fail? How long would it have taken to unscramble everything and figure everything out? My guess is we are talking a week or two” … Cassidy: So you would have just let them … Fama: “Let them all fail. (Laughs).” — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 494

Categorization

• SEED: Fama’s ‘let them all fail, it’d take a week or two’ is a quotable artifact of the thought collective’s resilience — an angle on how crisis non-response is rationalized as doctrine-confirmation.
• XREF: connects to: Markets gained legitimacy as experts lost it after 2008 — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 113; Even efficient-market theorists privately acknowledged mispricings existed. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1109; LTCM’s collapse was read as vindication of the efficient-market hypothesis — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1120 (+6 more)

Broader Connections

• Fama claimed the efficient-markets hypothesis was confirmed by the 2008 crash. #corroborates (1.00) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 710
• The 2008 crisis invalidated the preceding thirty years of financial orthodoxy #complicates (0.75) — Mark Blyth, Austerity, 133
• The 2008 crisis discredited efficient-market economists in public policy debate #complicates (0.72) — Mark Blyth, Austerity, 158
• Economics survived the 2008 crisis intellectually unscathed, unlike other disciplines under attack #corroborates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 456
• Efficient market theory could not imagine internally-generated systemic crisis #complicates (0.70) — Mark Blyth, Austerity, 130