Forecasting the crisis

A comment at The Drum drew my attention to this (old) WSJ op-ed.

The crucial point is that assessing systemic risk is difficult to impossible—and the likelihood of coming to a reliable consensus about it is even lower. Both Orszags and Mr. Stiglitz were officials in the Clinton Administration and saw the debates about Fan and Fred that the Clinton Treasury began in the late 1990s, only to get clobbered by the companies’ lobbying machine. Yet the three amigos still saw fit to put their names to a paper dismissing any risk of failure.

Why should anyone think that regulators—or economists—will predict the next systemic debacle any better? We only know better about the past. When the next problem erupts, as in 2002, smart people will be on both sides of the argument. And when large, systemically important companies are threatened with curbs on their business, they will pay Nobel laureates to write studies that explain away the dangers, and hire lobbyists to block any reform. A future Treasury secretary may also dismiss critics of a future Fannie Mae, or Goldman Sachs, as “ideologues,” as Hank Paulson did in 2007-2008.

The paper can be read here.

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16 Responses to Forecasting the crisis

  1. Denis of Perth

    The SPI 200 will be 4870 on 31/12/2010 and 6480 on 31/12/2015.

  2. .

    Stiglitz is totally unrepentant and amnesiatic on this.

    He still can’t resist stabbing the IMF in the back either.

  3. Andrew Reynolds

    Denis,
    Is that a closing, opening or mid figure?
    .
    Sinclair,
    Have you read Taleb’s Black Swans? It is a long book to cover a simple idea, but he is largely right. We cannot forecast such events or even know how bad one is while we are in it, so, to me at least, he picks up nicely where Hayek left off on this – or at least updates some of the analysis.

  4. .

    Taleb’s writing is getting progressively unhinged.

  5. Denis of Perth

    AR
    both r closing

  6. Steve Edney

    . Are you suggesting the black swan is unhinged or stuff since then.

  7. Steve Edney

    What is your confidence interval Denis. I’m assuming < 10 points, given the number of figures you quote.

  8. Steve Edney

    I mostly agree by the way. I also find him an insufferable wanker at times, but I think makes some interesting points. Or maybe just one point at length. To be honest I enjoyed Fooled by Randomness more.

  9. Denis of Perth

    My predictions are based on the ‘Trident Method’

  10. Denis of Perth

    Check Jim Rogers

  11. Andrew Reynolds

    Denis,
    Gee – it looks like you are serious with those numbers. Read Taleb – although, by the sound of it, not his recent stuff.

  12. JC

    Denis

    What the hell is the trident method? What dark corner of the web did that come from?

  13. .

    I can’t find anything when I google “Jim Rogers Trident method”

  14. daddy dave

    My predictions are based on the ‘Trident Method’

    Lo, I turn to page 21 of the “Trident Method” and all is revealed.

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