The recession as bad as the U.S. Revolution?
by Benjamin on February 16, 2009
Having seen numerous references to the 1929 recession and one very good argument suggesting that the 1893 crisis is a better analogy of the current crisis I was expecting some similar analogy in a recent interview with Nassim Taleb and Benoit Mandelbrot. I should have known better than try to predict what Taleb will say, as both he and Mandelbrot seems to agree that things are a lot worse than 1929… Maybe as bad as the revolution?
Mandelbrot, of chaos theory, butterflies-to-tornadoes and fractal fame, came up with a beautiful explanation of the problem that haunts the weather forecast and economic forecasters – but with some extra bad news for the economists.
The basis of weather forecasting is looking from a satelite seeing a storm coming, but not predicting the storm will form. The behaviour of economic phenomena is far more complicated than the behavior of liquids or gases
At least the focus of our economic enquiry might now shift – lets find out what causes the storms to form and the economy to act, not try and predict the outcomes.
You can see the whole interview here:
Is it that bad? I don’t know – but no-one really does. That being said, Taleb has a very good point when he argues that our over-efficient mega-banks do two things, they reduce the odds of a crisis, but when crisis strikes it is much much worse.
Tags: Benoit Mandelbrot, Black Swan, Nassim Taleb, recession
