Other academic disciplines have looked rather smugly at the public humiliation of their colleagues in economics. The non-mathematical appear to have their revenge, as the perils of over-reliance on complex symbolic notation and arcane formulae are relentlessly exposed.Sure. That seems fair enough. It is easy to picture the trading floor at Goldman Sachs littered with Lyotard, easy to imagine risk management falling through the cracks because all the continental philosophy bankers customarily read persuaded them they should believe in nothing and that so-called "risk" was just a signifier with no fixed transcendental relevance. When they were through decentering their subjectivity, the minions at credit-rating agencies went ahead and gave structured securities whatever the hell rating was requested; after all, any evaluative criteria will be compromised by the tautological assumptions that are always already tacitly accepted.
In fact, developments or fashions in other academic disciplines and also in the general culture contributed at least as much to a willingness to engage in absurd risks and to provide and accept valuations of complex and inherently unfathomable securities. The general cultural developments are sometimes termed post-modernism, which involves the replacement of reason by intuition, feeling, and allusion.
As far as I can tell, James is not joking. He wants readers to believe that postmodernism is responsible for a climate of irresponsibility among bankers on Wall Street -- and not something more immediately salient and obvious like, say, greed. This is an actual, undoctored quote from James's essay: "At the era's height, major financial players built vastly expensive collections of highly abstract modern art. A post-modern neglect or disdain for reality generated the sense that the whole world was constantly shifting and malleable, and might be as transient and meaningless as stock quotations." It seems a pretty postmodern way to argue, actually; just present a few incoherent juxtapositions of vaguely associated notions and demand that readers tease out and decide what it might mean (or better yet, have them settle on undecidability itself). James argues that financial innovation, political cowardice, and postmodernism all worked together so that "every sort of value - including financial values - came to be seen as arbitrary and fundamentally absurd." But just because philosophers may have been exploring the possibility that there was no "there" there with regard to Western values doesn't mean they advocated the idea that fictitious values should be actively created to artificially inflate asset values, or that derivatives whose notional value far exceeded the assets from which they were derived should be written. Just because both critical theory and quantitative finance are hard for laypeople to comprehend does not make them morally equivalent. And the fact that a postmodern analysis could be used to elucidate the techniques of finance (the building something out nothing aspects of it anyway) revealed how awry finance had become; it didn't supply a justification for it. Greed did that. The spirit motivating philosophers ( a concern for ways in which ideology distorts what passes for truth) is fundamentally different than the one that spurred financial innovators; to elide them is to discredit the whole notion of responsibility, which seems to be James's aim. In his final paragraph, he laments the possibility that society might regress to a "medieval" witch-hunt mentality by playing blame games. Better by far to suggest that everyone is responsible in some small way and preserve the existing social order.
A non-risible critique about the role of ideas in the crisis from Neil Sinhababu can be found here, and it demonstrates how a postmodernish style of inquiry can actually help unmask problems rather than contribute to them:
economists have managed to convince people of indefensible views on normative topics such as what it's rational for individuals to do, what's an appropriate object of moral criticism, and what would be a good distribution of resources. I don't know how many of them would, when pressed, defend these sorts of claims -- their discipline isn't supposed to be one that makes normative claims.
Saying you're not making any normative claims is, of course, a good way of getting people to accept the normative claims you make. A lot more in this sort of thing depends on the sorts of emotions that get communicated as people talk about stuff and the loaded words you use. Pareto optimality, for example, has 'optimality' built into it, and who doesn't like optimality? Of course, as Rawls tells us, a distribution where one person owns all tradable goods and services while nobody else has anything is Pareto optimal.
In any event, this is the kind of thing we ought to be concerned about, both as citizens and as philosophers. While ideas from other parts of academia can't get out to the public, economists are convincing people of ridiculous theses in moral and political philosophy that their research doesn't even support. (It probably helps that widespread social acceptance of these theses is favorable to the interests of very wealthy people.)