The Experts Can’t Figure It Out – Now What Do We Do? (We Still Don’t Know What Caused the Financial Crisis of 2008)
What do we do when the experts simply can’t figure it out?
Here’s a simple question: are there failing companies? Yes. Are there less-than-excellent organizations? Yes. Do you do everything you could do, should do, as well as you possibly could – as well as it needs to be done? The answer, I’m pretty sure, is no.
So, “less-than-excellent” is all around us. As we reflect on failures and deficiencies, we ask the next question: why are we not better? Why are our companies, our organizations, our own lives, not better?
Atul Gawande hinted at it when he wrote:
We have just two reasons that we may fail.
The first is ignorance – we may err because science has given us only a partial understanding of the world and how it works. There are skyscrapers we do not yet know how to build, snowstorms we cannot predict, heart attacks we still haven’t learned how to stop. The second type of failure the philosophers call ineptitude – because in these instances the knowledge exists, yet we fail to apply it correctly.
(Atul Gawande, The Checklist Manifesto: How to Get Things Right).
Or, to put it in simple terms: we don’t know; or, when/if we do know, we don’t do. Back, yet again, to the “knowing-doing gap.”
Now, on the “we don’t know” part of this equation…. Sometimes, we have not yet learned. On the news last night, there was a report on an amazing breakthrough drug for lung cancer. It looks like it might actually work, and they profiled a woman (with two young children still at home) who was on her death bed, and she is practically back from the dead. We now know something we did not know, and she is alive, maybe for quite a while longer. Wonderful.
And there are, we suspect, so many more such wonderful discoveries around the corner.
But, as much as we have come to rely on the breakthrough discoveries and insights of “experts” – they simply don’t yet know everything.
Which brings me to the paragraph of the day. This came in on my AtlanticWire Five Best Columns e-mail this morning. The article referenced is: What Caused the Financial Crisis? Don’t Ask An Economist. I end this post with the paragraph summary of the article from the AtlanticWire. And I remind you that there are some questions for which we simply do not know the answers — yet. And the more complex the question, the bigger the problem this presents. It really is quite a paragraph on lack of consensus, the limits of experts and their expertise, and a little on the drawbacks of this contentious age we live in.
Here’s the paragraph (AtlanticWire here; the article linked to from the FiscalTimes here):
Mark Thoma on the disabling divide in macroeconomics “What caused the financial crisis that is still reverberating through the global economy?” asks Mark Thoma in The Fiscal Times. “Last week’s 4th Nobel Laureate Meeting in Lindau, Germany–a meeting that brings Nobel laureates in economics together with several hundred young economists from all over the world–illustrates how little agreement there is on the answer to this important question.” Economists offered all sorts of conflicting answers like “the banks, the Fed, too much regulation, too little regulation, Fannie and Freddie, moral hazard from too-big-to-fail banks, bad and intentionally misleading accounting, irrational exuberance, faulty models, and the ratings agencies.” This lack of consensus among the world’s most renowned economists is troubling, Thoma writes, because we cannot find a solution to a problem we do not agree on. Perhaps we could try to fix all the potential problems cited. “But that unnecessarily constrains a whole range of activities in the hope that we limit the particular behaviors at the root of the crisis. That’s an inefficient way to fix the problem. And in any case, how do you proceed when some of the causes cited by economists are at odds with each other?” The truth is, macroeconomists have not yet agreed on a single model for the economy. Because economic theories are applied to historical, not experimental, data, economists can come up with multiple theories that explain the past equally well. “This problem is not just of concern to macroeconomists; it has contributed to the dysfunction we are seeing in Washington as well. When Republicans need to find support for policies such as deregulation, they can enlist prominent economists–Nobel laureates perhaps–to back them up. Similarly, when Democrats need support for proposals to increase regulation, they can also count noted economists in their camp.” Thoma says he hoped that a cycle-interrupting cataclysm like the 2008 crisis would provide enough new macroeconomic data to support one theory over another–he thinks it supports demand side over supply side. In fact, economists have just used it to back up their previously held positions and “dig in their heels,” making our debates “larger and more contentious than ever.”