From Kahneman's point of view, the most important moment of the recent economic crisis came when Alan Greenspan admitted at a congressional hearing that his theory of the world had been mistaken. "Greenspan expected financial firms to protect their interests, because they are rational companies and the market is rational, so they would not take risks that would threaten their very existence," Kahneman says.

"Where did he go wrong? Because he did not distinguish between the firms and their 'agents' [their managers]. There is a huge gulf between the companies and their agents. Firms take the long view, while agents have short perspectives and take the short view. The compensation models of the corporation and their agents are different. The executives did not commit suicide when they took risks; it was the corporations managed by these agents that committed suicide.

"People are always asking me: 'Are the people who got caught up in the financial crisis idiots?' The answer is, the bank managers were not complete idiots. Greenspan's admission speaks for itself: The theory that a bank is some sort of rational agent that protects the public's interest is wrong. The assumption of rationality is a fallacious one in the first place, and in the second place, the assumption that a bank should be seen as a single, rational player is irrelevant. One must look at who is managing the bank - management that receives incentives to do things that are not connected to anybody's interests." …

 "When it comes to finance, people link risk to volatility, but in reality, there is no connection between the two at all. There is a connection, but not when we're talking about huge risks. Greenspan and others believed that the global system - by virtue of its being global - was ipso facto more stable. Then it turned out that while it might have been more stable, it was also more extreme.