The 2008 crisis was fundamentally a crisis of economic ideas

Evidence

The deep crisis was, then, a crisis of the ideas that had made these instruments and institutions possible. If you believed the new instruction sheet, shadow banks served the real banks by augmenting liquidity and assisting risk transfer. Derivatives made the system safe by making it possible for individuals to sell risk to those willing to buy it, who were presumed to be best suited to hold it by virtue of wanting to purchase it. And the banks themselves, those with skin in the game, were assumed to be the best people to judge the risks they were taking using models they designed themselves, even if it turned out after the fact that the problem was precisely that the banks didn’t have skin in the game since they were moving everything they could off book into SIVs. — Mark Blyth, Austerity, 132

Categorization

• QUESTION: Worth chasing: the empirical detail that banks lacking skin in the game via off-balance-sheet SIVs was a central fact known after the fact — how early was it knowable?
• XREF: 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; Economic crises are also conceptual and intellectual catastrophes — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 45 (+15 more)

Broader Connections

• Ideology shapes economic crisis rather than merely reflecting it #expands (0.90)
• Economic crises are also conceptual and intellectual catastrophes #expands (0.85) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 45
• Economics survived the 2008 crisis intellectually unscathed, unlike other disciplines under attack #expands (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 456