The calm and and less-painful-than-expected conclusion of the big auction of Lehman Brothers' credit default swaps has led to some talk that maybe the role of CDSes (CDSs? CDS?) in bringing on our current financial near-debacle has been wildly overblown.

Making the case perhaps even more strongly is Ben Stein's Yahoo column from last Friday, in which he argues that "these deadly derivatives" (CDSes, that is) are the No. 1 cause of our current troubles. If you believe that Ben Stein is invariably wrong (and this is not an unreasonable belief), then CDSes cannot be the No. 1 cause of the financial crisis. Q.E.D.

But are they a major cause? The yes argument seems to have two parts:

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I've been meaning for a while to put a plug in here for Arnold Kling, who has delivered some of the most consistently provocative commentary on the financial freakout over the past couple of months. Much of Kling's appeal has to with his possibly unique-on-this-planet combination of knowledge, experience and attitude. He's a product of the MIT graduate economics program of the late 1970s--the same place that gave the world Ben Bernanke, Rick Mishkin, Paul Krugman and lots of other People Who Shape Our World Today. He worked (not briefly but for years and years) at the Federal Reserve and then Freddie Mac. He started and sold an Internet company. He teaches high school economics and statistics. He's a libertarian.

Put all that together and you get great screeds like the one he posted today. A sample:

My main beef with economists is that standard macroeconomics does such a poor job of describing what is going on. The textbooks models are pretty much useless. Where in the textbooks is "liquidity preference" a demand for Treasury securities? Where in the textbooks does it say that injecting capital into banks is a policy tool?

Graduate macro is even worse. Have the courses that use representative-agent models solving Euler equations been abolished? Have the professors teaching those courses been fired? Why not?

I have always thought that the issue of the relationship between financial markets and the "real economy" was really deep. I thought that it was a critical part of macroeconomic theory that was poorly developed. But the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men's urge for mathematical masturbation.

Economists ought to admit that we do not know much about what is going on today. Neither do the Fed Chairman and the Treasury Secretary. Of course, the market demand is for "strong" leaders and for "strong" economists, who can fool the public into believing that they have great knowledge. The ones who do this best are those who have fooled themselves.