Learning from the Global Financial Crisis: Creatively, Reliably, and Sustainably

By Paul Shrivastava; Matt Statler | Go to book overview

10 Wrong assumptions and Risk Cultures
Deeper Causes of the Global Financial Crisis

Ian I. Mitroff and Can M. Alpaslan

The causes of the global financial crisis are not merely financial. The crisis did not happen merely because we failed to understand the technical aspects or the economic implications of financial products and innovations. The deeper causes lie within us and within the institutions we create.

In the following sections, we analyze two contributing factors to the global financial crisis: (1) the economics and finance departments in business schools and universities and (2) Wall Street. Specifically, we look at a set of assumptions that constitute the deepest inner core of these institutions. By definition, assumptions are not easily visible to those outside of an institution or industry. In fact, because assumptions are taken for granted, they are often invisible to those on the inside as well. As a result, they are largely unconscious and difficult to question. Nonetheless, their effects can be devastating. That is why we believe it is imperative that, before jumping to any conclusions about the causes or remedies of the current global financial crisis, scholars examine in depth the cultures of these two institutions and the validity of their assumptions.


A Risky Definition of Risk

We turn our focus first to some of the fundamental assumptions held by economics and finance departments (EFDs) and the way they define risk.

This chapter is based on Swans, Swines, and Swindlers: Coping with the Growing Threat of Mega-
Crises and Mega-Messes (Stanford, CA: Stanford University Press, 2011).

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