Labeling the result of wishful thinking

Lawrence Cunningham struggles with finding a proper label for the current economic situation at Concurring Opinions.

how unconscious exclusion of painful realities from the conscious mind caused the crisis and continues to infect policy responses to it.

All candidates for culprits ultimately involve false stories that people—citizens, business people, regulators and politicians alike—told themselves. Exemplars: the American dream of home ownership can be made available to all; housing prices tend inexorably upward; massive current borrowing can be repaid from future assumed prosperity; financial risk can be diversified, hedged, securitized away by carving up underlying financial instruments; regulators can let market participants self-monitor and self-correct; and politicians can safely respond to citizen appetites by sustaining all these false beliefs.

In other words, the downturn in the economy is a result of wishful thinking, thinking that diverged from reality and intellectual integrity.

It is something to think about.

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