When humans face major system breakdowns, the instinctive response is to try to mend (jury-rig) the system so it will start running again. Yet, sometimes the failure points out a major flaw in the system requiring changes that completely undermine the status quo and force a re-formulation of the underlying rules. Today, I found two pieces that show how disruptive the current financial crisis has been to the established worldview.
Josh notes that the financial movers and shakers have yet to understand how deeply damaged the social contract has been by the crisis and that going back to business as usual (albeit with some visible contrition) isn't going to assuage the feeling that those movers and shakers have been willfully careless with our lives and they have forfeited our trust. When a friend or business contact betrays you in that way, one's reaction is: "It will be a cold day in hell before I trust you enough to let you have that kind of power over my life again. You've done enough."
And what happens when the working model fails? Well, as Paul Krugman says, people who can't understand the failure of the model stand in the way of fixing the problem.
In both cases, what was perceived as true in 2000 and 2006 has been shown to have been based in wrong assumptions (and a false faith) which means trying to maintain and restore the status quo is doomed to failure. And the biggest failure for those who can do something about it is not understanding that new answers and new social contracts are required to get past this crisis.