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Book cover: Research in the Sociology of Organizations

Research in the Sociology of Organizations

ISSN: 0733-558X
Series editor(s): Professor Michael Lounsbury

Subject Area: Organization Studies

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The meltdown was not an accident


Document Information:
Title:The meltdown was not an accident
Author(s):Charles Perrow
Volume:30 Editor(s): Michael Lounsbury, Paul M. Hirsch ISBN: 978-0-85724-205-1 eISBN: 978-0-85724-206-8
Citation:Charles Perrow (2010), The meltdown was not an accident, in Michael Lounsbury, Paul M. Hirsch (ed.) Markets on Trial: The Economic Sociology of the U.S. Financial Crisis: Part A (Research in the Sociology of Organizations, Volume 30), Emerald Group Publishing Limited, pp.309-330
DOI:10.1108/S0733-558X(2010)000030A014 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Article type:Chapter Item
Abstract:This volume includes two major explanations of the meltdown that I critically discuss. The first is a “normal accident theory” arguing that the complexity and coupling of the financial system caused the failure. Although these structural characteristics were evident, I argue that the case does not fit the theory because the cause was not the system, but behavior by key agents who were aware of the great risks they were exposing their firms, clients, and society to. The second interpretation is a neoinstitutional one, emphasizing that ideologies, worldviews, cognitive frames, mimicry, and norms were the source of behaviors that turned out to be disastrous for the elites and others. The implication is that elites were victims, not perpetrators. I argue that while ideologies, etc., can have real effects on the behavior of many firm members and society in general, in this case financial elites, to serve personal ends, crafted the ideologies and changed institutions, fully aware that this could harm their firms, clients, and the public. Complexity and coupling only made deception easier and the consequences more extensive. For anecdotal evidence I examine a decade of deregulation, examples of elected representative, regulatory officials, firms, and the plentiful warnings.

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