Nice to see you here. As this is a spiritual blog, morality is a central topic for me. I’m sure the factors you mention played a part, as well as the basic problem that humans react in herds – people were starting to believe that the market could only go up. What that lead to has been known ever since the first ’stock market’ collapse in human history: tulip bulbs prices sky rocketing in Amsterdam – and then price collapse.

If we could find a way to NOT have people respond in herds so much, we’d be a lot better off. But I’m afraid that’s very unlikely to change. Partly, probably, because one of the strengths of our species is precisely that we learn from each other and can delegate knowledge to specialists. And then the specialists have to be trusted.

I recently wrote an article where I point towards the fact that this crisis was also a crisis of epistemology, of the biased ideology stemming from the financial industry’s pseudo-scientific approach to understanding the economy, and in particular, its blind faith in mathematical tools that in essence are unable to capture the enormous complexity of a modern market economy.

For example, Felix Salmon wrote a recent article where he demonstrates that a single mathematical formula proposed by a Chinese economist who was revered to the point of being consider the possible next Nobel prize winner, was responsible for the triple A’s given to CDO’s that exploded as soon as the real estate market collapsed.

My conclusion is that Wall Street would benefit greatly not only from better regulation and ethics, but also from hiring people with a more right-brain approach to the world, less prone to the pseudo-scientific hubris that deluded the industry into the arrogance of thinking they could predict the economy with simple mathematical models.

I reflect on these issues and provide links to relevant articles here: http://alanfurth.com/a-whole-new-mind-for-finance

We did it to ourselves. We voted for it. Paid for. Supported it.