Noreena Hertz, professor of finance, sustainability and globalisation at Erasmus University in the Netherlands, kicked off the CFA Institute's second annual European Investment Conference in Frankfurt with a wake up call for the assembled asset managers and bankers.
"This was not just a financial crisis - this was an existential crisis that exposed a faultline in the system," she said. "The way we thought about the world was profoundly flawed."
Hertz identified several major problems - a culture of intellectual conformity, the deification of experts like Alan Greenspan, and dogma superceding reason. She said the free-market economics that triumphed post-1979 should have been treated more as a hypothesis, not fact, but within economics debate was discouraged, and thinkers like Keynes and Minsky who didn't fit the prevailing view were sidelined.
For their part, individuals and businesses had accepted orthodox thinking and allowed the proclamations of "experts" to go unchallenged. She urged delegates to think in a more holistic way - for example, rather than just focusing on rising house prices in the US, they should have given some consideration to the amount of credit cards the average household had.