The IEA has this week fired a huge salvo into the idea that the current crisis resulted from a failure of free markets and an excess of unregulated greed. "Verdict on the Crash" is by a group of heavyweight authors who take apart, piece by piece and line by line, the idea that lenders, bankers, hedge funds and short-sellers ran amok and brought ruin down on all of us. On the contrary, the authors lay the blame squarely on the shoulders of governments with their central banks and regulators.

Central banks flooded the market with money and easy credit, fuelling an asset bubble and sending false signals to business. They distorted risk assessment through their regulatory approach, leading financial institutions to create ever more complex derivatives. Governments and their agencies (like Fannie Mae and Freddie Mac) pushed lending to those at high risk of non-repayment, while their tax and regulatory regimes encouraged complex and opaque methods of increased gearing. They created the illusion that regulation could replace trust and reputation in oiling the wheels of credit.

The IEA's book has deservedly received huge coverage. Its importance is that the powers that be (G20 and downwards) seem determined to misinterpret events and bring in more of the controls, regulations and interventions that lay behind the crisis in the first place. It is very important that the case should be made that this was a failure of governance, not of markets, and the IEA has done us all a favour by putting that case so convincingly. Their report and its summary are accessible on line.