Late last year, Niall Ferguson wrote:

This hunt for scapegoats is futile. To understand the downfall of Planet Finance, you need to take several steps back and locate this crisis in the long run of financial history. Only then will you see that we have all played a part.

The key point is to appreciate why the quants were so wrong.

This past weekend, Paul Krugman picks up the story:

The central cause of the profession's failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, his latest essay doesn't offer much new insight on the subject. There's plenty of material in the archive that covers this ground with more interest ... a sampler follows.

John Cochrane:

It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn't make them less false.

Paul Graham:

I'm not saying we should stop, but I think we should at least examine which lies we tell and why.

H. L. Mencken:

There is always an easy solution to every human problem -- neat, plausible and wrong.

Freeman Dyson:

By excluding messiness, they excluded the essence of life.

Decius:

The economist's suggestion, that ignorance is bliss, is a perfect example of why accounting is the opposite of art.

Anthony Lane:

The problem is not the ignorance. The problem is the bliss.

John Lanchester:

If I had to name one high-cultural notion that had died in my adult lifetime, it would be the idea that difficulty is artistically desirable.

Compare Decius, in January (below), with Krugman's parable of the Capitol Hill Baby-Sitting Co-op:

Cutting production means layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs ...

Patricia Princehouse's friend:

It takes half a second for a baby to throw up all over your sweater. It takes hours to get it clean.

Decius:

As the saying goes, you are entitled to your own opinion, but not your own facts.

Believing your own bullshit has consequences. ... They still haven't learned their lesson. They still haven't figured it out. They are still lying to themselves.

Frank Sandoval:

My heart swells in my chest and while I laugh,
I feel fear, smell a faint stench of insanity.

Matt Taibbi:

It's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity.

Nassim Nicholas Taleb:

Many hedge fund managers ... are just picking up pennies in front of a steamroller. And sometimes the steamroller accelerates.

Take time out for safety:

Lisa: Uh, are you sure that's safe?
Kearny: Well it ain't gettin' any safer.

Have you seen "Doubt"?

Father Brendan Flynn: You haven't the slightest proof of anything!
Sister Aloysius Beauvier: But I have my certainty!

Your daily dose of Simpsons:

Smithers: That's quite a nice model, sir.

Burns: Model?

How Did Economists Get It So Wrong?