This theory has already been debunked, and was circulated by many Libertarians almost immediately after the economic collapse occurred, as an obvious from of damage control. Many people have already debunked the theory, so this link is only one of many sites that discusses what can only be described as an urban legend:

http://leisureguy.wordpress.com/2009/03/18/the-cra-myth-debunked/

This is a very important theory for Libertarians to push, because it is the only real defense they have when people question their opposition to current regulations. If they can’t prove that the CRA was primarily responsible for the economic collapse, which they can’t, and they haven’t, then they have a lot more to answer for.

I find it troubling that Michael has been so easily fooled, and that he is actively misinforming his readers. A simple corroboration of the theory by other commentators would have shown him that it is, at the very least, a controversial claim.

In the future, Michael might want to refrain from merely repeating rumors told to him by people who he seems to blindly trust. Economics, and politics are much more complex discussions than UFO’s, ESP, Atheism, and Bigfoot.

Michael is discussing topics that are way out of his league, and he needs to stop. It’s starting to make him look flippant.

2. This post is more about economics than polictics

3. There are fanatics on both sides, so it makes no sense to call one of them an ideology or religion when both can be, and both can be analyzed rationally

Personally, I commend Michael for having the guts to post it – I’m sure he realized he’d alienate some readers – but when getting to the truth you can’t let offending some people stand in the way. After all, he posts openly about atheism right?

Finally…I’m surprised more readers have not seen the similarities between evolution (which seems to be highly praised) and free market economics. They are both beautiful and simple in terms of survival of the fittest, the invisible hand, etc. I tend to agree with his analysis here, while keeping an open mind.

Great job Michael, keep it up!
Brian Armstrong
http://www.StartBreakingFree.com

I have to agree with those that feel that this Shermer’s market posts smack of ideology, contrary to his generally unbiased and rational writing.

One thing that seems counterproductive for a skeptic (and the skeptics movement in general) is for a blog author to never respond to any of the comments. It’s not really a rational discussion if it’s Post From On High, Then Let The Masses Argue Amongst Themselves. Apologies if I’ve mischaracterized what’s going on here.

If Taleb disagrees, he disagrees. I just find his assessment interesting and insightful. Regarding government regulations or market imposed standards, I want transparency so risk can be reasonably evaluated (people in finance have been terrified lately because the information of credit swaps and stuff isn’t public and the uncertainty has been a killer) and firebreaks so that some of the piling on/herd behavior is mitigated (after BS people asked who’s next and started betting against Lehmans – who knows whether they might have survived if speculators weren’t trying to ride them into the ground and get rich doing it). I’m not interested in regulations just to regulate.

As for Taleb’s comments on medicine, I’m not familiar with them so I can’t evaluate his position other than the line you offered. Frankly, I’d agree with him to a point on it (and if you swing a stick in my family you are likely to hit a doctor). His analogy suggests that sometimes a doctor who doesn’t know what he is doing makes things worse … which I believe is true. My father was in radiation oncology and while most physicians he knew and worked with were competent, he knew a number that for ego, money, or ignorance left patients worse off than they were when they came in the door. Not many. Not often. But enough.

Also, I don’t get the sense he was advocating for alternative medicines – just reminding us of our own incomplete knowledge and faulty understandings – in finance, medicine, and everywhere else. But heck, if you can show me where I’m wrong, please do.

That is not to say that economics is useless. There must be some relationship between scarcity and cost, and between demand and inflation, for example. The fact that it is very much a social science means that it will often only be able to deal in probabilities or generalisations, but that does not make it any less valid.

In fact, you could even compare it to medecine, in that you are trying to work out a cure given a set of symptoms, often.

And, oh yeah, he’s skeptical of medicine too.
http://money.cnn.com/2008/03/31/news/economy/gelman_taleb.fortune/index.htm
“Sometimes you need to say, ‘No model is better than a faulty model’ – like no medicine is better than the advice of an unqualified doctor, and no drug is better than any drug.”

Fair enough. I think can agree. It just seems the folks who get on Bloomberg are mostly narrative with no experimental evidence. Regards.

I haven’t read Taleb yet (though I do plan on it). There are economists in the finance industry, and, I concede, they do use economic tools or applied economics.

We, however, can distinguish between micro- and macro-economics (not to mention behavioral, neuro- and other heterodox economics). The different schools tend to be focused on macro-economics. For this, experiments are harder to conduct since most cities, states and countries aren’t interested in falsification and so on.

So, indeed, economics isn’t entirely scientific. It is, to a certain degree. This is the problem with all social science. Just to be clear, I, too, believe that medicine (evidence-based, not all that other nonsense) is far more scientific than economics. I was just trying to point out that not all economic work is non-scientific.