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September 01, 2009



Thanks Chris, I'm chuffed that you found the paper of interest. Regarding your points:

I fear Anthony has too much confidence in economists’ ability to build useful scenarios

When I wrote the paper I was only thinking about academic economists, and I have very little confidence in their ability. As is probably clear I relied heavily on blog posts by Tyler Cowen, Jeff Hummel, Bryan Caplan, and these guys are the only ones I found who are even remotely asking the right questions.

I hadn't considered the extent to which non-academic economists can and do use scenarios. I'm not familiar with any good studies, but they must exist. Having said that, any decent scenario analysis will consider "black swan" events (and would have done so long before Taleb popularised the notion of Knightian uncertainty).

The whole point is to mock the "how likely is that" response because it's that type of thinking that makes people focus narrowly on what's "likely" and completely ignore the once-a-generation event that has a massive impact.

Regarding your other point, as you say it's not inconsistent with what I'm trying to say. I only wished more economic journalists used their imagination, rather than scurrying around for a predication.


We can group these into (at least) six categories. They are: standard neoclassical mechanisms - the Econ101 toolkit; the role of institutions; the effect of social norms; of bounded knowledge (but full rationality); of principal-agent issues; and the impact of limited rationality.

Alternatively, they can try to grasp some very fundamental economics - as long as the CBs rule the roost and FRB is the rule, the same sorry scenatio will be repeated - for profit.


This sounds like a serious bout of 'whatifin'.

You can only really plan against the things that predictably have happened in the past. Speculating over what might happen in the future is seriously mad.

In dynamic systems, it is best to remove the things that predictably cause systems to malfunction. Targets and bonuses are two of those things as the Systems Thinker John Seddon has highlighted.

By removing the systems conditions linked to dysfunctional behaviour you can reduce some of the more extreme events and increase the healthiness of the financial institutions.

See The Systems Thinking Review for examples of targets and standards and the impact that they have in the public sector



"You can only really plan against the things that predictably have happened in the past. Speculating over what might happen in the future is seriously mad."

I don't even know what this means. Are you suggesting that it's impossible to act under uncertainty? That wondering about what might happen is "mad"? Bizarre...

rolex datejust

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.

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