Epilogue

Summary

The financial crises that started in 2007 in the United States and rapidly spread throughout the world economy have proved yet again that crises are part and parcel of the economy, and that the debate between visible and invisible hands is far from over. Those who attribute zero probability to the reoccurrence of such dramatic events, and they are the clear majority when the economy functions properly, as it does most of the time, prove that the human mind has infinite capacity to delude itself. The belief that we have learned the lessons of the past and have managed to put in place the mechanisms that will ensure that the fragile system will not break again characterizes conventional wisdom in common times. Those who remember the years before the current fragility certainly are aware that most observers thought that, “It cannot happen again.” “It,” the great depression, happened over seventy years ago, and policy makers, so conventional wisdom argued, had long since drew the conclusions.

In this book, we have shown how the simple truths known to Thornton more than two hundred years ago – that the system is fragile and prone to severe collapses, that convertibility to gold is no defense in itself, that discretionary policy is always necessary but cannot always guarantee society against a crisis, that one has to manage the complex system that connects the decentralized economic units and makes up the financial system – went against the beliefs of most of the classicals. Those few who absorbed the lessons, even if only partially, carried the debate through the nineteenth century, but not until Wicksell close to one hundred years later did these truths become conventional wisdom.