Economic Indicators

For a film critic, David Denby writes with amazing confidence about the economy. If he understands it so well, why is he wasting his talent reviewing films for The New Yorker when he could be saving our country from the next crisis?

Speaking of which, the causes of crises are always easy to see after the fact.  It's before that's tricky.  Not that no one ever sees them coming--in fact, at any given time, there are countless experts with countless reasons why we're about to fail.  When anything goes wrong, pick your favorite. Just don't expect them to predict the next one.

Which is my roundabout way of introducing Denby's review of Charles Ferguson's Inside Job, a documentary about the economic crisis of 2008.  I haven't seen the film, though if the (generally positive) reviews are accurate, it points a finger at market failure and doesn't go into any mistakes the government may have made.  If so, the film is probably a bit simplistic, but Denby can't get enough.

Ferguson [...] uses interviews and historical information to suggest that many of the transactions weren’t rational at all. They may have been profitable in the short term, but they were destructive to the companies the executives worked for, and he demonstrates that anyone with common sense and a skeptical view of unregulated financial markets could have seen the dangers coming. None of the senior public officials with an ideological commitment to deregulation, like Alan Greenspan, Hank Paulson, and Ben Bernanke, and none of the investment-bank executives who made hundreds of millions from the C.D.O. boom were willing to speak to Ferguson on camera. So he brings forth the savants who warned of the impending crisis early on: Nouriel Roubini, of New York University, whose musical Persian-Israeli-Turkish-accented English is delightful; and Raghuram Rajan, now of the University of Chicago, who, in 2005, while serving as the chief economist of the International Monetary Fund, delivered a paper warning of the disaster to come in front of an audience that included Alan Greenspan and Larry Summers, and was ignored or criticized for his efforts. Roubini and Rajan, awed by the size of the crisis they were unable to prevent, are now sombre models of contained ego and radiant pride.

First, does Denby think just because something didn't work out that the people responsible knew, or should have known, what they were doing was clearly irrational or destructive?  Even well thought out plans fail.  Denby should try to avoid such after-the-fact cheap shots or worse, mindreading.  (I might add there are solid arguments explaining why everyone thought what they did made sense--some of these even include a belief that the government would back them if they failed, but this doesn't seem to interest Denby or Ferguson.)

Second, Ferguson not getting interviews with top deregulators sounds like a failure of the film.  Odd that Denby doesn't care. (Maybe those people knew a little about Ferguson and realized talking to him would be an irrational and destructive act.)

Finally, Denby trots out his experts.  He's in love with them--"savants" with "contained egos and radiant pride." He even likes their accents.  The film says they saw what was coming.  Maybe they did.  But, as noted, there are always papers out there warning about what's next.  Have these experts been consistently right before and after the crisis, or was this their big hit?  Does this mean their advice will help us now (and will there be a sequel if they get it wrong)?

Even more important, a lot of people saw trouble coming.  This doesn't mean something could have been done.  The roots of a crisis usually go way back, and by the time there's a clear problem on the horizon, there isn't the capacity, or political will, to take the measures necessary to deal with it.

So when a documentary claims to explain a complex crisis, maybe Denby should write with a little more skepticism and subtlety.  I know he's capable of it.  He did it the week before when reviewing Waiting For Superman, and the bad guys worked for the government.