Make no mistake, we must learn from financial comedy of errors

It is time for economists to examine their beliefs about the way the economy works, finds Ellis Thorpe

How apt and highly relevant to have a Library of Mistakes housed in the city, given the financial experiences of the economy over the last decade. Perhaps more so because Edinburgh is the home of one of the major players in the disastrous financial crisis.

The Scotsman reported at the time of its opening in 2014, that there were 2000 volumes spanning generations, from the Parable of the Talents through the Great Depression of the 1930s to the 2008 financial crisis. They document and reveal the financial follies of a variety of bankers, financiers, traders, speculators et al; all sharing a common goal- “follow the money and become incredibly rich.”

Sadly what can’t be gainsaid is how history shows that financial disas- ters badly hurt lots of ordinary people who often lose their jobs, even their homes and their families.

The fact that there are so many volumes of financial mistakes must alert one to the possibility that history repeats itself, as there are psychological factors which affect market behaviour, in so-called free market capitalism which augurs ill for the future.

One such psychological factor is the notion of “irrational exuberance” which became popular in the 1990s to characterise the market mania of the dot.com bubble. It, of course, later burst to have such calamitous effects on the US and global stock markets.

US Federal Reserve Board chairman at the time, Alan Greenspan, said he was lying in his bath “con-