My old friend Mario posted this link on Facebook to Jeff Frankels' blog. He gives us his simplified graphic representation of the global economic crisis. For a single diagram, it is a pretty helpful thing to look over.
What could have been included is a box for 'socio-cultural factors,' meaning, the changing values that govern behavior as citizen and as consumer. Because I don't believe it is a given that lowering credit standards automatically results in more home sales. More generally, I've never accepted that there is any such thing as 'rational' behavior on the part of consumers. If there was, then where would that leave the ad agencies? And wasn't there a time way back when most Americans mistrusted lending practices of any kind, and preferred to buy property in either cash or a very limited number of installments? Americans had to be taught to borrow.
I think the lack of attention given to cultural factors among economists is important to note because it seems to me that there is, hidden among all the economics lessons granted by this latest and greatest crisis of capitalism, a