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I Read 21 Books About The Financial Crisis And They Explained Nothing

Source: http://www.businessinsider.com/andrew-lo-21-books-financial-crisis-2012-2

Ever thought you would have to read 21 books to get to the bottom of what caused the financial crisis?

Andrew Lo, an economist at MIT, has some bad news: it’s going to take at least 22.

Lo, a leading expert on hedge funds and financial engineering, has written a paper (h/t NPR) for the Journal of Economic Literature describing his experience reading 21 books on the crisis — nine by journalists, 11 by academics and one by a former Treasury Secretary.

His conclusion: In a field that prides itself on its scientific rigor (however dismal), the books reveal that alarmingly few facts about the crisis have been agreed upon. Was there too little or too much regulation? How much of a factor were low interest rates? No one’s been able to say conclusively.

“After each book, I felt like I knew less,” Lo told NPR’s Planet Money.

Economics, he says, has fallen well short of that standard when it comes to understanding the crisis:

“Many of us like to think of financial economics as a science, but complex events like the financial crisis suggest that this conceit may be more wishful thinking than reality.”

Read Andrew Lo’s Reading About the Financial Crisis: A 21-Book Review >

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According to the Chicago Booth/Kellogg School Financial Trust Index (h/t WSJ’s Sudeep Reddy), only 23% of Americans trust the financial system.  And 62% are either “angry” or very “angry” about the state of the economy.

Trust in the financial system hasn’t been this low and anger in the economic situation hasn’t been this high since March 2009.  And March 2009 was when the S&P 500 hit that horrific low of 666.

“In an election year, this certainly indicates the importance of the economy to the political agenda,” wrote Paolo Sapienza.  Sapienza co-authored the index with Professor Luigi Zingales.

Then again, March 2009 turned out to be an amazing time to buy stocks.

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