On Tragedy

A frequent correspondent who I respect highly has just given me two new pieces of vocabulary: anagnorisis and hamartia. Wikipedia's entries can be summarised thus:

• Anagnorisis (ἀναγνώρισις), also known as discovery, originally meant recognition in its Greek context, not only of a person but also of what that person stood for, what he or she represented; it was the hero's suddenly becoming aware of a real situation and therefore the realisation of things as they stood; and finally it was a perception that resulted in an insight the hero had into his relationship with often antagonistic characters.
  
• Hamartia (ἁμαρτία) can be seen as a character’s flaw or error. The word is rooted in the notion of missing the mark and covers a broad spectrum that includes accident and mistake, wrongdoing, error, or sin. In Aristotle's Nicomachean Ethics (didn't you always want to write that clause in your blog?) hamartia is described as one of the three kinds of injuries that a person can commit against another person. Hamartia is an injury committed in ignorance (when the person affected or the results are not what the agent supposed they were).

The credit crunch is a tragedy. A tragedy for those that have lost their jobs while blameless (I'm not thinking of Jimmy Cayne here); a tragedy for those that were conned into a mortgage they cannot afford; perhaps even a tragedy for investors who lost a fortune because they believed ratings agency due diligence. There's lots of Hamartia: a belief in the robustness of risk transfer via securitisation and conduits; a belief that you know what the CDRs will be on mortgage pools; various kind of mis-selling and representations that were either knowingly or unknowingly false.

Then we had a series of moments of Anagnorisis: the initial falls in the prices of mezz then AAA ABS; the wave of announcements of write-downs; the distress of the monolines and the implications of that for the muni markets; conduit and SIV failures; Libor spikes and central bank interventions; rising delinquencies.

Let us take a moment then to mourn a tragedy,-for that is not too extravagant a word,-to hope that at least lessons can be learnt, lives mended, a better equilibrium attained.