In his most recent work, the statistician and options trader turned
philosopher Nassim Taleb asks a wonderful question: “What is the
opposite of fragile?”
The answer is not “robust” or “strong”- which is probably what you
were thinking - because those words simply mean less fragile. The true
opposite of fragile is anti-fragile.
A system that becomes stronger when subjected to perturbation is
anti-fragile. The point is that regulation should be designed to
heighten anti-fragility. But the regulation we are contemplating today
does the very opposite: because of its very complexity – and often
self-contradictory objectives – it is pro-fragile.
Over-complicated regulation can indeed be the disease of which it
purports to be the cure. Just as the planners of the old Soviet system
could never hope to direct a modern economy in all its complexity, for
reasons long ago explained by Friedrich Hayek and Janos Kornai, so the
regulators of the post-crisis world are doomed to fail in their
efforts to make the global financial system crisis-free. They can
never know enough to manage such a complex system. They will only ever
learn from the last crisis how to make the next one. Is there an
alternative? I believe there is. But I believe we need to go back to
the time of Darwin to find it.
philosopher Nassim Taleb asks a wonderful question: “What is the
opposite of fragile?”
The answer is not “robust” or “strong”- which is probably what you
were thinking - because those words simply mean less fragile. The true
opposite of fragile is anti-fragile.
A system that becomes stronger when subjected to perturbation is
anti-fragile. The point is that regulation should be designed to
heighten anti-fragility. But the regulation we are contemplating today
does the very opposite: because of its very complexity – and often
self-contradictory objectives – it is pro-fragile.
Over-complicated regulation can indeed be the disease of which it
purports to be the cure. Just as the planners of the old Soviet system
could never hope to direct a modern economy in all its complexity, for
reasons long ago explained by Friedrich Hayek and Janos Kornai, so the
regulators of the post-crisis world are doomed to fail in their
efforts to make the global financial system crisis-free. They can
never know enough to manage such a complex system. They will only ever
learn from the last crisis how to make the next one. Is there an
alternative? I believe there is. But I believe we need to go back to
the time of Darwin to find it.
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