At a book launch earlier this week, guests heard from Bob Swarup, an investment adviser at the Pensions Regulator who has written a book about the financial crisis.
The book is called Money Mania: booms, panics, and busts from ancient Rome to the great meltdown, and aims to put the most recent financial crisis into the context of the last 2000 years.
His main message was that we never seem to learn from history, that with all the technology and sophistication we have in conducting our affairs, we still make the same mistakes.
Financial crises happen once every ten years, more or less, he said, and while we spend time focusing on the instruments and products that got us into trouble, this is just a short-term, shallow approach that does not get us anywhere.
The problem is us, we are too unreliable and driven by emotion - greed, fear and ego, all the things that behavioural economists have been talking about for ages.
Financial drama was a consequence of democracy - giving people the freedom to act means they are likely to make all sorts of wrong-headed mistakes, and we just have to learn how to manage it (innovation, on the other hand was the upside).
While his diagnosis might be true, the prognosis may be depressing. It is 200 years since the Enlightenment, but still people do not behave rationally, even if, especially the well-educated, they think they do.
Perhaps the only way is to build into the financial system the allowance for human error, a concept that behavioural economists have been trying to do, and are starting to be accepted. While it may go against conventional economists’ conception that people are rational agents, a sharp dose of reality is perhaps the most important thing we need.
