After Paul Krugman's "New Gilded Age" piece in the New York Times Magazine last week, they've published an article by Michael Lewis titled "In defense of the Boom", which is billed as a response.

Lewis starts out by discussing the role of the stock market in the dotcom boom, and the recent spate of lawsuits from Eliot Spitzer. He would like people to realize, for instance, that Merrill Lynch spent three years giving out realistic estimates of the true worth of dotcom stocks, before it started serving up the same stew of lies as everyone else. Not that he's saying any of that to emphasize Merrill's culpability; this is instead, like the title says, his attempt at a defense.

So, who is to blame for the crash? Why, the individual investors who forced --- yes, forced --- Merrill to start spewing nonsense about the market. On this view, Merrill was, in effect, paying its analysts not to try to figure out the true worth of companies, but rather just to tout the merits of stocks that seemed to be going up anyway, to make its customers more comfortable with their choices. And Merrill paid the analysts huge sums of money for this service. This is, again, what Lewis says in Merrill's defense.

(And this defense comes complete with a tendentious misreading of the email which Spitzer built his case on. Lewis quotes exactly one of these messages, and comes up with a twisted reading of that one message in which it just claims that the analysts are being bullish on the Internet. He also argues that Merrill's investment bankers were mere "incidential beneficiaries of the firm's new bullishness", as opposed to being beneficiaries of lies about specific companies. This strawman version of the case ignores the virtual festering heaps of more specific email also cited by Spitzer, in which Merrill's analysts describe specific companies which they were still touting enthusiastically in public as "junk", "crap", and worse, and in which specific bogus recommendations were tied directly to banking business. You don't have to look at the actual court documents to find that stuff, not that there's any particular difficulty in digging them up; those emails were widely quoted in the press, including the Times itself, at the time of the indictments. And yet Lewis claims that the one email he quotes is the only one of relevance to the case. Does the Times have fact checkers?)

And so it goes. In section II several companies, including Worldcom, are described as "afterthoughts: the boom could have just as easily happened without them." A page or two later, Worldcom proves to be the ultimate and only source for the false reports of tremendous Internet traffic growth which underlay much of the Internet-boom hysteria. A few pages after that, he argues that

...if speculators drive up the price of tech stocks to ridiculous heights, a result is vast numbers of young people with technical training and a lust for entrepreneurship, a higher social status for the entrepreneur and, uncoincidentally, many interesting business ideas that are at the moment ahead of their time but one day may well be right on it.

without pausing to consider which, if any of those effects are likely to survive the bust. Perhaps he should consult the vast numbers of young people who abandoned their formal education for what technical training it takes to get an MCSE, worked hundred-hour weeks for companies with bogus business plans pushed by entrepreneurs with the ethics of card sharps at best, and are left with a deep disgust for businessmen and business. They're not hard to find, if you have a will to look.

Lewis's best argument in defense of the net boom is that, like the railroad boom of a hundred years ago, it left a great deal of useful infrastructure and technology in its wake, along with the wrecked companies and ruined lives --- except that he doesn't have the historical sense to actually push the railroads as an analogy; they appear only in a list of successive booms which he uses to argue that reform is futile, since scandals keep happening anyway. Never mind that the effects had been getting less severe over time, at least up till this last one, which was marked by the undoing of earlier reforms. Perhaps Glass and Steagall knew what they were doing after all?

In short, the conservablogs which like to bash the Times have the makings of a truly fine rant in this piece. Which I expect to see on Andrew Sullivan's web site just as soon as hell freezes over...