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May 29

Masters of Nothing: How the Crash Will Happen Again Unless We Understand Human Nature

If we are to avoid a second crash, then we must achieve a better comprehension of human behavior and apply this understanding to how the financial system is organized. Behavior is important, whether it be the behavior of those who saw it coming, or of those who constantly berated them. The behavior of those who rode the boom and switched at the tipping point to ride the bust, or the behavior of those who held on to their principled as the system collapsed around them. It was human behavior after all that led us to construct a bubble nobody suspected was dangerous, yet nonetheless would burst with disastrous consequences.

Contrary to the views of many before the crash, the cycle is inevitable – you cannot eliminate boom and bust. In a boom the bullish are promoted while the cautious are overlooked, reinforcing the cycle. This factor is generally ignored by the beautiful, but flawed, models of economic analysts. Since we cannot abolish the cycle, we must ensure that busts are not so dangerous in the future. In this special edition of Masters of Nothing, Matthew Hancock MP and his co-author Nadhim Zahawi MP cite specifically U.S.-based examples, anecdotes, and statistics to explain the causes of the crash, and argue that the policy solutions are there if we are brave enough.

Matthew Hancock is the Member of Parliament for West Suffolk and was formerly Chancellor of the Exchequer George Osborne’s Chief of Staff and an economist at the Bank of England.

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Matthew Hancock MP
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Nile Gardiner, Ph.D. Nile Gardiner, Ph.D.

Director, Margaret Thatcher Center for Freedom Read More