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The Black Swans Attack!

Chris Dillow:

Stumbling and Mumbling: Taleb vs economists: or me, all this is very troubling.  It suggests that what we economists have to learn from Taleb has nothing to do with the nature of risk - we‘ve all known that - but about others’ rationality. We should ditch the assumption - which in a sense is mere courtesy - not only that others are rational but even the weaker assumption that they are nearly so. Perhaps we should indeed regard them merely as “empty suits.” But this is a vastly greater departure from standard practice than anything Taleb has suggested about the nature of risk. All of which leaves me genuinely puzzled. Were banks risk managers really that bad? Are bosses an order of magnitude stupider than even I had thought? Or is something else happening? Help me.

Yes, bank risk managers really were that bad.

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