Advancing a Free Society

Why there is strong disagreement about the causes of the financial crisis

Wednesday, February 9, 2011

Barry Ritholtz, author of  "The Big Picture," is among the most interesting and insightful econo-financial bloggers.   In 2009 he posted an article identifying 25 causal factors of the financial crisis culled from his book Bailout Nation.

Recently the Federal Crisis Inquiry Commission released its report,along with two dissenting reports.  Ritholtz compared its findings with his 25 causal factors, adding in eight more contained in the report.

Numerous distinguished economists have put forth their own explanations, placing emphasis or one, two, three, or some combination of factors.  In almost every case, multiple independent events and personalities are said to have brought about and intensified the crisis.  It is not possible to conduct any kind of rigorous statistical analysis of one event with up to 33 causes.  Moreover, comparisons with historical incidents might require more variables and still not have a sufficiently large number of observations to demonstrate statistical correlation (or causality).