Quoting the Crisis

Only theoclassical economists could call the failure of our most elite firms that were looted by their CEOs a triumph of capitalism. I wrote:

“Martin Wolf repeated the well-worn claim that Enron’s failure demonstrates capitalism’s virtues in 2003. It is a view most famously stated by Larry Lindsey, a member of George W. Bush’s first (failed) economic team, when he said in January 2002 that Enron’s failure was “a tribute to American capitalism.” The then treasury secretary, Paul O’Neill, wasn’t to be outdone. He insisted Enron’s failure proved “the genius of capitalism.””

Our family’s rule that it is impossible to compete with unintentional self-parody remains intact. A discipline (economics) that counts massive looting by the CEOs of elite control frauds as its greatest triumphs desperately needs an intervention. None of these control fraud failures (and that includes Fannie and Freddie) involves valiant efforts by economists to prevent the looting. The theoclassical failures to prevent control fraud did not occur because the economists strove to prevent the looting but were defeated by impossible odds. Theoclassical economists were the anti-regulatory architects of the criminogenic environments that produce our epidemics of control fraud. They are the elite frauds’ most valuable allies.