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LEARNING FROM THE GLOBAL FINANCIAL CRISIS

Stanford University Press

Contents

Acknowledgments....................................................................................................................................................................................................................xiIntroduction Paul Shrivastava and Matt Statler....................................................................................................................................................................................11 Truth, Beauty, and the Financial Crisis: Evaluating What Works Robert Richardson and Matt Statler...............................................................................................................................172 Aesthetic Leadership: Walking toward economic recovery Ralph Bathurst and Margot Edwards........................................................................................................................................553 Smashing Moneytheist Mirrors: How Artists Help Us Live with Financial Schizophrenia Pierre Guillet de Monthoux..................................................................................................................764 Hence God Exists Skip McGoun....................................................................................................................................................................................................965 The Art of Finance Steven S. Taylor.............................................................................................................................................................................................1176 The Play Ethic and the Financial Crisis Pat Kane................................................................................................................................................................................1217 Cassim's Law Henrik Schrat......................................................................................................................................................................................................1288 Managing the Global Financial Crisis: Lessons from Technological Crisis Management Paul Shrivastava, William Gruver, and Matt Statler...........................................................................................1419 Failures of High Reliability in Finance Nathaniel I. Bush, Peter F. Martelli, and Karlene H. Roberts............................................................................................................................16710 Wrong Assumptions and Risk Cultures: Deeper Causes of the Global Financial Crisis Ian I. Mitroff and Can M. Alpaslan...........................................................................................................18811 A Busy Decade: Lessons Learned from Crisis Planning and Response from 1999 to 2009 Michael Berkowitz...........................................................................................................................19912 A Critique of Managing the Global Financial Crisis: Lessons from Technological Crisis Management Brett Messing.................................................................................................................20513 Green Financing After the Global Financial Crisis Perry Sadorsky...............................................................................................................................................................21314 Leveraging Ourselves out of Crisis—Again! Aida Sy and Tony Tinker........................................................................................................................................................24515 The Normative Foundation of Finance: How Misunderstanding the Role of Financial Theories Distorts the Way We Think About the Responsibility of Financial Economists Andreas Georg Scherer and Emilio Marti.....................26016 A Multilevel, Multisystems Strategic Approach to a Sustainable Economy Mark Starik.............................................................................................................................................29117 The Global Financial Crisis: A Perspective from India Murali Murti and N. V. Krishna...........................................................................................................................................313In Lieu of a Conclusion Paul Shrivastava and Matt Statler.........................................................................................................................................................................329Contributor Biographies............................................................................................................................................................................................................337Index..............................................................................................................................................................................................................................347

Chapter One

Paul Krugman (2009) recently attributed the ongoing global financial crisis to a confusion among economists who have, he alleged, allowed an appreciation of the beauty of certain theoretical models to cloud judgment about their truth. Although organizational theorists have considered the relationship between truth and beauty periodically over the years (e.g., Astley 1985; Weick 1989; Nonaka 1993), no attempts have yet been made to consider the debates among contemporary philosophers about the distinction between facts and values (Putnam 2002). In this chapter, we trace out the history of these philosophical debates, seeking to develop a pragmatic theory of meaning that has general implications for organizational theory and specific implications in view of the ongoing financial crisis.

Framing the Problem: the Financial Crisis as a Confusion of Beauty and Truth

In a New York Times column titled "How Did Economists Get It So Wrong?" the Nobel laureate Paul Krugman (2009) alleges that economists have, first and foremost, mistaken beauty for truth. Falling under the woozy sway of predictive power, they have mistaken their models for the real world. As a matter both of disposition and practice, they have gathered data from the world that confirm the veracity of these models, and they have discounted data that do not support them. These mistakes, Krugman claims, set up the global markets for a crisis, and so long as we do not critically examine and learn from those mistakes, we will continue to perpetuate the situation in which we find ourselves: choked with debt as a nation, interrogating financial executives in congressional hearings, but still trying to generate models that predict a free collective of self-interested market participants growing in perpetual balance with the resources available in the natural world. Such claims merit more careful examination.

The notion of mistaking beauty for truth calls forth a particular tangle of metaphysical, epistemological, and ethical problems. At a glance, it may signal a faulty metaphysics in which the model is mistaken for the world. It may employ a faulty epistemology in which a distinction between facts and values is blurred. It may be driven by a hubristic ethos in which...