But neither do I believe, as he does, that our economic crisis was the result of the "irrationality"-indeed the "financial lunacy"-of the owners and managers of commercial banks and other financial intermediaries.Īs evidence that it was, DeLong offers four examples, one of which, however-the overcommitment of GM and Chrysler to gas guzzlers-is irrelevant to the behavior of the financial industry. (Later in his review DeLong calls me "one of America's leading public intellectuals," with "very wide" influence-both of which statements are incorrect.) I also am not committed to the "foundational assumption" that DeLong states. I am not in fact "leader of the Chicago School of Economics" and I am not a judge of the Fourth Circuit. For without this underlying assumption, the clock strikes midnight, the stately brougham of Chicago economic theory turns into a pumpkin, and the analytical horses that have pulled it so far over the past half- century turn back into little white mice. Richard Posner, leader of the Chicago School of Economics and Fourth Circuit Court of Appeals judge, uses his new book, "A Failure of Capitalism," to try to rescue the Chicago School's foundational assumption that the economy behaves as if all economic agents and actors are rational, far-sighted calculators.
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