Smart will never mean 'not wrong'
Letter to the editor

Thanks for Holman Jenkins's "The Meltdown Remains a Whodunit" (Business World, Jan. 18) with its instructive discussion of the ideas of Jeffrey Friedman and Wladimir Kraus. Yes, we have to face a key reality: Well-intentioned but disastrous mistakes are made by very intelligent, well-educated, highly informed people, backed by vast computing power and reams of data, but wrong nonetheless. Just consider how the Federal Reserve's transcripts reveal its complete failure to understand the housing bubble. So the principle indeed applies to central bankers and regulators, in whom the Obama administration (like others before it) places so much faith, as well as to private financial actors and, of course, also to economists commenting from the sidelines. They simply did not, do not and cannot know the future that their own intertwined actions and ideas are creating.

As to why they all make the same mistake at the same time, consider that cognitive herding is a natural response to the inexorable uncertainty of the future. So central bankers, regulators, bankers, investors and academics cluster into the cognitive herd. To paraphrase a line from John Maynard Keynes, a prudent banker is one who goes broke when everybody else goes broke.

Alex J. Pollock is a resident fellow at AEI

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Tuesday, September 16, 2014 | 5:00 p.m. – 6:00 p.m.
The Constitution as political theory

Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.

Wednesday, September 17, 2014 | 8:10 a.m. – Thursday, September 18, 2014 | 1:30 p.m.
Third international conference on housing risk: New risk measures and their applications

We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.

Thursday, September 18, 2014 | 2:15 p.m. – 3:00 p.m.
Speaker of the House John Boehner on resetting America’s economic foundation

Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.

Friday, September 19, 2014 | 9:15 a.m. – 11:00 a.m.
Reforming Medicare: What does the public think?

Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.

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