The 2008 crisis invalidated the preceding thirty years of financial orthodoxy

Evidence

The crisis, then, was, much more than the stagflation that discredited Keynesianism, a crisis of ideas. It was a crisis of the instruction sheet of the past thirty years. The claim that the prices at which financial assets traded represented the true economic fundamentals was, when the boom was exposed as a bubble, off by orders of magnitude. The rational expectations of sophisticated investors turned out to be shortsighted and bubble chasing, as irrational exuberance on the upside gave way to runaway pessimism on the downside, just as Keynes had warned about eighty years ago. Viewing moral hazard as the only policy problem led to the decision to let Lehman Brothers fail, which suddenly exposed the global banking system to the risk posed by unbacked CDS contracts. — Mark Blyth, Austerity, 133

Categorization

• XREF: Frames 2008 as a crisis of ideas — exactly the intellectual-history method this reader is tracking for the austerity literature, connecting forward to Mattei. — connects to: The 2008 crisis falsified neoclassical economic theory yet elites kept using it. — Mark Blyth, Austerity: The History of a Dangerous…, 694; The 2008 crisis was nonlinear and multicausal, leaving it overexplained and overdetermined — Mark Blyth, Austerity: The History of a Dangerous…, 74; 2008’s crisis installed speculation as the defining modern economic subjectivity — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 25 (+17 more)
• QUESTION: The Lehman decision is presented as caused by moral-hazard-only thinking — worth chasing whether that attribution is fully supported by the historical record.

Broader Connections

• The 2008 crisis was expected to falsify neoliberal doctrine but did not #contradicts (0.95) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 80
• The 2008 crisis failed to produce a paradigmatic shift comparable to the New Deal. #contradicts (0.90) — Natascha van der Zwan, Making Sense of Financialization, 115
• The 2008 crisis was widely read as ending the free-market era. #corroborates (0.85) — Angus Burgin, The Great Persuasion, 538
• The 2008 crisis replaced triumphalist free-market rhetoric with open-ended austerity #expands (0.80) — Max Haiven, Cultures of Financialization, 158
• The 2008 crisis discredited efficient-market economists in public policy debate #qualifies (0.80) — Mark Blyth, Austerity, 158
• Post-2008 financial reforms left the system’s core infrastructure unchanged #qualifies (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 25
• 2008’s crisis installed speculation as the defining modern economic subjectivity #expands (0.78) — Aris Komporozos-Athanasiou, Speculative Communities, 25
• Economists had no consensus explanation for the 2008 financial crisis #qualifies (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 448
• Finance escaping crisis consequences legitimated the economics profession dodging blame #complicates (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 583
• The 2008 crisis disoriented the left instead of vindicating its economic worldview #qualifies (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 46
• Social studies of finance recapitulated orthodox economics and obscured the crisis’s political economy #complicates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 956