Black Swan
I would like to address one of the most powerful and well-crafted arguments against the Black Swan model of the world: The argument that Black Swans are really not Black Swans in the sense that they are predictable.
Nouriel Roubini once said (sorry, I lost track of where, so I cannot offer a citation) that the current economic crisis was not a Black Swan because it was easy to predict. In fact he, as it is widely known, predicted it. So the current economic crisis is really not a Black Swan, but something that any average person, with a sense of clarity and average maths would have seen. This argument has two main flaws:
- Yes, it is true that the current crisis was easily predictable. But for most people it was not, especially economists. What I mean is that the narrative that the majority of people have in their heads (unlimited credit, unlimited debt, unlimited growth) made the economic crisis a Black Swan because most people were not (are not) cognitively and culturally prepared to see the event.
Think about the typical Black Swan example of the turkey for Christmas: A turkey is well fed throughout the year. Because of that, it thinks all life is good. Every day reinforces that feeling. Then comes Christmas eve and the poor soul is slaughtered. It is easy for an outside observer (or a not-so-stupid turkey) to note the dramatic circumstances of the turkey (in opposition to the turkey’s expectation of good life).
Our turkey is mainly the economic, political and media elites (we end up being all slaughtered as they decide our fate) plus all people who accrued more debt that they could obviously hold or supported policies of unsustainable debt.
The fact that the mere unbiased observation of a US private debt chart in 2006 would be enough to make anyone (anyone with basic maths understanding and an open mind, that is) shiver is irrelevant: most “smart” people totally failed to do that. They (we all, at the end) are turkeys. - Yes, this crisis was predicable. But lets not overgeneralize. Any complex, intertwined system will have parts that are more important than expected and will behave in strange ways, sooner or later. If you are familiar with the crisis of 1929, think Credit-Anstalt. Credit-Anstalt (a small Austrian bank) is credited in starting the second part of 29 crisis when it defaulted in 1931. A small Austrian bank started the domino chain that brought the world the WORST (more socially damaging) part of the depression of 29.
Nonetheless, point 1 can be mitigated. A discussion about that will require talking about ideology and fundamentalism, especially in the light of one of the modern fundamentalist religions: neo-conservative economics. As with all fundamentalist ideologies it serves us bad, especially if it is (as it still is) the main narrative dominating power circles.
Julaftonen (The Christmas Eve), a watercolor painted 1904-05 by Carl Larsson (1853-1919)
By The Way, my previous post was a visual depiction of Excesses in Dubai
Credit where is due: Images taken from Wikipedia
