Thursday, April 09, 2009

How to create Black Swan resillient financial system

Ten suggestions from Nassim Taleb.

It starts with "What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest. "

He ends it with the following hope that we create "A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news. In other words, a place more resistant to black swans."

1 comment:

Pierre said...

Here's an excerpt from Paul Krugman's introduction to Keynes' General Theory (he wrote this in 2004, i think). Well worth the effort spent reading it...

...Rather than getting bogged down in an attempt to explain the dynamics of the business cycle – a subject that remains contentious to this day – Keynes focused on a question that could be answered. And that was also the question that most needed an answer: given that overall demand is depressed – never mind why - how can we create more employment?

A side benefit of this simplification was that it freed Keynes and the rest of us from the seductive but surely false notion of the business cycle as morality play, of an economic slump as a necessary purgative after the excesses of a boom. By analyzing how the economy stays depressed, rather than trying to explain how it became depressed in the first place, Keynes helped bury the notion that there’s something redemptive about economic suffering...