Barry Ritholtz writes about the consequences of holding on to bad ideas. There are none for the people who came up with them in the first place. Particularly think tanks just go blissfully forward.
Here are some ideas that have failed without sufficient notice: Profit maximizing economic actors, austerity as a virtuous policy during recessions, the efficient-market hypothesis, tax cuts pay for themselves, self-regulating markets.
During the financial crisis, including many attempts to negate the role radical deregulation of financial markets had as an underlying cause of the crisis. American Enterprise Institute’s Peter Wallison and Edward Pinto were the leading proponents of the anything-but-deregulation causation. First, they blamed the Community Reinvestment Act — the anti-redlining legislation that had nothing to do with subprime lending. Next, it was the Department of Housing and Urban Development and the Federal Housing Administration. When that didn’t hold up they blamed Fannie Mae and Freddie Mac. When most of the subprime loans that went bust were shown to be from private lenders that didn’t follow Fannie or Freddie guidelines, they quietly changed the subject.
