Somewhere in China, David Li is keeping his head down. Before the crash, his grateful admirers in Wall Street and the City declared that he deserved the Nobel Prize for Economics for discovering the wondrously enriching theory of "Gaussian copula functions", which turned base assets into gold. While the market for credit default swaps went from $920bn in 2001 to $62 trillion in 2007, he was a genius. Now that his name appears in headlines such as: "Was David Li the guy who 'blew up Wall Street'?" acclaim from the Swedes seems unlikely.

Mathematicians are trashing his reputation and the reputation of the banks' other quantitative analysts. Their critiques are, inevitably, complicated, but the quants' basic fault is easy enough to grasp. They assumed they could place reassuringly neat numbers on the risks of default in bundles of mortgages or bonds. Their figures were fantasies that bore no relation to the real economy in which homeowners and companies had to fund their debts because the quants never understood that the uncertainties in calculating risk were so great, all attempts to measure them were dangerously misleading.

"They were pretending mathematics was magic," explained Tim Johnson at Heriot-Watt University, one of a group of financial mathematicians in British universities who specialise in taking apart the models of bankers and dealers.

Ministers, led by Lord Drayson, have been wooing Johnson and his colleagues of late and I can't say I am surprised. Tens of millions of people in the rich world and hundreds of millions in the poor are losing their livelihoods because bad maths allowed bankers to pretend to themselves that they were not being insanely reckless. The government thinks it knows how to stop a recurrence of the folly. It reasons that Britain is lucky enough to have a band of independent experts who can save jobs and stop the taxpayer being fleeced by pointing out the errors of the City's calculations. The public pays the academics' salaries and academics can return the compliment by protecting the public.

"You have a fucking duty to speak out," as one blunt politician explained the deal to them.

But they are not going to speak out for a reason readers of this column will guess: Johnson and his colleagues fear being hauled before the libel courts. Academics have noted the willingness of the judiciary to allow believers in "alternative" chiropractic therapy to sue science writer Simon Singh, and can imagine all too graphically what would happen to them. Chiropractors are small-time operators working from suburban offices, one said. Bankers have the most expensive lawyers in the City on call. If his colleagues were to hint that a bank was risking its investors' money, they would be hammered.

The naive, who suppose that the law would protect mathematicians who told the truth, do not understand the wretched condition of freedom of speech in England. The exorbitant costs of libel actions are far beyond the means of all academics and, increasingly, most newspapers; Simon Singh can only fight the chiropractors because he is the author of four international bestsellers. As important, the law is biased against defendants and judges put the worst possible interpretation on a writer's words. In all likelihood, a mathematician who criticised the models of Goldman Sachs, say, or the Royal Bank of Scotland would find himself in court defending assertions he never realised he had made.

Thus, after the worst crash since 1929, and with the world economy in crisis, people who know what went wrong and why it went wrong are too frightened to go public. If their fear does not make the case for reform of the libel laws on American lines, I don't know what will. We should have free debate on matters of public importance, as long as writers are not malicious and do not display a wild disregard for the truth.

But where is reform to come from? Conservative lawyers tell me that David Cameron is struck by the keenness of the judiciary to find in favour of Russian oligarchs and Middle Eastern petro-billionaires who, to put the case against them at its mildest, do not have the best interests of British democracy at heart. I accept that you should not put your trust in promises from Tories, particularly when they are trying to woo journalists in the run-up to an election. But I have watched a parade of grotesques from around the world marching out of English courts with fat cheques and gagging orders in their pockets and accept that at least some Conservatives have come to believe that the libel law is a threat to national security.

The attitude of the liberal-left is more ambiguous. In theory, liberals ought to believe in freedom of speech. In practice, Labour ministers have yet to meet campaigners for law reform and wider liberal society has yet to overcome a way of thinking that stops it reconnecting with the best parts of the liberal tradition.

Simon Singh and the mathematicians are now living with the consequences of the human rights movement of the late 20th century. Margaret Thatcher's repeated election victories convinced British liberals to try to win in the courts what they could not win at the ballot box. The trouble with the strategy has always been that British judges, like judges across the EU, do not believe in freedom of speech. They are illiberal liberals who will defend all rights except the most fundamental right of a citizen of a free country to make his or her case without fear of the consequences.

"Wrong opinions and practices gradually yield to fact and argument: but facts and arguments, to produce any effect on the mind, must be brought before it," said John Stuart Mill. But the average British judge does not believe that free debate in the marketplace of the mind will expose "wrong opinions and practices". He believes they must be suppressed because he retains the fear of the old European aristocracy that the masses cannot see through dangerous ideas and bad arguments. To speak plainly, if I may, the judiciary has an elite suspicion of democracy and the price of its elitism is becoming too high for this impoverished country to bear.