Tails of the unexpected

Thursday, August 23rd, 2012

Andrew G Haldane shared tails of the unexpected at a recent credit-crisis convention:

The interactions which generate non-normalities in children’s games repeat themselves in real world systems — natural, social, economic, financial. Where there is interaction, there is non-normality. But risks in real-world systems are no game. They can wreak havoc, from earthquakes and power outages, to depressions and financial crises. Failing to recognise those tail events — being fooled by randomness — risks catastrophic policy error.

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