Long but interesting article, so I’ll just link it here.
-Jon
Thank you Jon. This article is priceless.
Ordinarily I avoid venturing into conspiracy theories, but I just cannot miss the oppotunity in this case. The reason being that if there is one black spot in Mr. Taleb’s accusations against Ben Bernanke, the Fed and, in essence, the banking sector it seems to be this: isn’t central and fractional reserve banking precisely an example of shifting your exposure type from a fourth-quadrant style to a third- or second-quadrant styled one? Thus lending credence to a “creature from Jekyll Island” inspired conspiracy?
His scope seems to be constrained to the view that if only all the “Ben Bernankes” of the world would just heed his warnings about being blind to the fourth quadrant we, or the “economy”, could be more shock-resistant when experiencing a “blowup” (See Figure 1 in the article). Well, what if one refuse to constrain one’s view to so simple an understanding of others; that everyone is less smart than oneself! Why not: Some are actually smarter than myself, but most aren’t, i.e instead of:
- Scope A: Population = {Me, Sucker-1, Sucker-2, … , Sucker-n}
why not?:
- Scope B: Population = {Me, Rockefeller-1, Rockefeller-2, … , Rockefellar-m, Rothchild-1, Rothchild-2, … , Rothchild-k, Sucker-1, Sucker-2, … , Sucker-n}
What makes him think that the “Rockefellers and Rothchilds”* in their decision-making wisdom (phronesis) didn’t say to each other:
“We cannot predict a blowup and redundancy is for suckers anyways; so let the suckers worry about that; they know nothing abut these matters, and as we all know - what you don’t know won’t hurt you!.. Muhahaha**”
*) I must admit that I am not well versed in the history of who the proponents of the Fed were.
**) Added for a theatrical effect [;)]
Could this be one of Mr. Taleb’s black swans? [:P]
NB Don’t get me wrong. As I said I think the article is priceless and I learned alot. Terms like ergodic, phronesis, akrasia and iatrogenic have entered my vocabulary just to name a few. Obviously pin-pointing the idea of the forth quadrant is brilliant! Has Mr. Taleb coined this phrase?
A very impressive reading, even with some vague connections to the Austrian School of Economics… thanks and a Bump for others!
Nassim Nicholas Taleb is a great admirer of the Austrian School, if you see the Black Swan.
He feels that Austrians have hit upon the right ideas about human behaviour, its effects on large scale events, and how people interpet information in a given situation. He also admires Friedrich Hayek’s beliefs on never having enough information to act on accurately.
He isn’t an Austrian, however, because he prefers to be a skeptical empiricist. At the same time, he still approves of the Austrian School dismissal of past statistics and trying to use mathematical models in social sciences. He also admires the non-hyperspecialization of Austrians.
He’s an ally.