I remember way back when I read Liar's Poker, and thought, good read, but wrong. That is, to the extent Michael Lewis stuck to personalities, anecdotes about the rich and famous, and allusions to his major of art history, he was great. When he made riffs on economics, such as, that it's all based on hype, or everyone is a big faker, it was an overstatement to a considerable degree, and degree is ultimately important. It's not all a game of BSDs playing macho games, there are some real issues about pricing and risk management, which Lewis was oblivious to in his brief career there.
His latest article in Portfolio.com notes that the subprime mess is because...Black-Scholes is wrong! I worked with some guys who thought Black-Scholes was wrong, and would write papers to journals, and didn't get any traction. The key is, it is not 'wrong'. It has been proved several independent ways. It is--sacre blue!--based on incorrect assumptions, and since day one, people have been addressing what happens when this assumption is changed, etc. Models are always wrong, sometimes useful. Lewis doesn't really understand finance, which is why he would be shocked to know that people were layering B-S with outside the box adjustments before he went to college. But even if Black-Scholes is predicated on the idea than you can sell a stock at its price, and this is wrong (er, so the price is not a price?), what the heck does that have to do with subprime? The subprime mess was about as related to Black-Scholes as the Dividend discount model, or the Miller-Modigliani theorem, or Fisher's breakdown of the interest rate into a real rate and inflation expectations. They all involve numbers, finance even, but not really the same. If they were relatives, they would be 'third cousins once removed'.