Risky Risk Management
Since the financial breakdown last autumn, regulators have begun to embrace “macro-prudential” models to manage “systemic” risk, rather than leaving banks to manage their own risks. But both banks and regulators lumber on in the untenable belief that all risk is measurable (and thus controllable), ignoring John Maynard Keynes’s crucial distinction between “risk” and “uncertainty.”
https://prosyn.org/BdALYXL
LONDON – Mainstream economics subscribes to the theory that markets “clear” continuously. The theory’s big idea is that if wages and prices are completely flexible, resources will be fully employed, so that any shock to the system will result in instantaneous adjustment of wages and prices to the new situation.