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Stella Jiang

Mr. Zielinski

Colloquy Eta

3rd January 2020

The Demagogue of The Age

The 2008 Financial Crisis in the USA caused catastrophic damages to the global

economy. When speaking of its causes, many parties may get involved in the discussion. This

essay will argue that the media and economists are the most responsible party for the crisis as

a demagogue. To start off, they confused people with complicated interpretations of the

economy and did not explain facts well, even misleading them. Secondly, mainstream

economists proposed abolition of government regulation on the economy, which led to the

collapse of the whole financial system. Last but not least, even though some people believe

that they may cause panic when telling the truth, they could still lessen the eventual damage

if they did so.

To begin with, the media and economists in 2008 focused not on their duty of explaining

how the economy works and how to help the economy to flourish but on how to confuse the

people with complex information. In 2008, the Neoclassical Economics, the school of

economics that was the most prevalent in America, focuses on building obscure mathematical

models of the economy and fascinate the audience. A survey done on the students of some top

graduate programs in economics indicated that the students generally tend to value

“excellence in mathematics” and “ability to make connections with prominent professors”

over “having a thorough knowledge of the economy” in a professional economist (Klamer

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and Colander 18). It can be derived that the trend in economics wasn’t appreciating the

truthful knowledge but the ability to show off talent and expertise in front of the audience.

Also, during the period before the crisis, economists found that even some excellent passages

with solid theoretical foundations were difficult to be published in some “top journals”

(Harvey). The media also discouraged the publication of authentic knowledge, preventing the

public from correctly understanding how the economy works. In conclusion, the media and

economists conspired to confuse the public with intrinsic messages and prevented them from

understanding the economy. They hid the existence of the financial bubble from the

population accelerated the expansion of the bubble.

Moreover, before the crisis happened, economists had suggested the government not to

implement much regulation on the economy. The neoclassical economists stood for a free

market. A free market, a classical concept of capitalism, is a market with little government

regulations. Most economists at the time believed that in a free market competitions would

make the market self-efficient and that government regulation would intervene with the

competitions (Kenton). However, many economic commentators now agree that the free

market led to the final crash of the market since it allowed the mortgage-backed securities to

circulate freely (Harman). What the economists suggested could ruin the economy. However,

this concept of free-market still had many supporters back in 2008, including people with

important positions in the market and the government such as Alan Greenspan, head of US

Federal Reserve, Milton Friedman, famous economists, and Larry Summers, US Secretary of

the Treasury (Harvey). It can be inferred that the neoclassical economic concept even

penetrated through important parts of the government and that the government certainly
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reduced their regulation on the economy. According to their flamboyant theory, they gave the

government inappropriate suggestions and succeeded in making the government believe in

them.

Lastly, some may also argue that the reason why media and economists told the public

false information about the US economy because they would cause panic in the society if

they tell the truth. The panic would even bring a sooner crisis and break the bubble earlier.

However, the fact was that the bubble was growing while the public has no idea about the

true situation: the economy was making more and more trades with the mortgage-backed

securities, and these securities would penetrate the entire economy and their roles would

become more and more significant, just like how a snowball sliding down a snowy hill would

increase its size over time. In the end, the media and economists didn’t tell the truth, and the

eventual damage cause was far bigger than a panic. If the economists and media would tell

the truth sooner, the damage to the economy after the crisis would be less. A scene in the

movie The Big Short demonstrated how the mortgage-based securities were circulating

throughout the economy as how more and more people bet on Selena Gomez to win in the

casino. The later game ended, the bigger the number of people losing money would be

(McKay). If the media and economists would do their job to remind the American people of

the truth, the severity of the crisis would alleviate in significant levels. In conclusion, it would

be more appropriate for the media and economists to tell the public truth although may cause

a panic because telling the truth would lessen the fatal consequences of the broken bubble.

To sum up, the media and economists are the most responsible group for the American

financial crisis in 2008. In the first place, they misled the public by offering obscure
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knowledge and didn’t explain the situation of the US economy correctly. In the second place,

economists succeeded in suggested the government to allow a free market. Finally, while

some may argue that the media and economists would cause panic when they tell the truth,

they would still have reduced the damage caused by the crisis if they told the truth sooner.

Works Cited
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Harman, Chris. “Economic Crisis: Capitalism Exposed.” Socialist Review, Feb. 2008,

socialistreview.org.uk/322/economic-crisis-capitalism-exposed.

Harvey, John T. “How Economists Contributed to the Financial Crisis.” Forbes, Forbes

Magazine, 3 Aug. 2012, www.forbes.com/sites/johntharvey/2012/02/06/economics-

crisis/#830b0173b303.

Kenton, Will. “Define Neoclassical Economics.” Investopedia, Investopedia, 18 Nov. 2019,

www.investopedia.com/terms/n/neoclassical.asp.

Klamer, Arjo, and David C. Colander. The Making of an Economist. Westview Press, 1990.

McKay, Adam, director. The Big Short. The Big Short, Paramount, 2015,

www.amazon.com/Big-Short-Christian-Bale/dp/B019969US8.