Financial Complexity

Financial markets, their regulation and the politics around them are so complex, that changes of regulatory input produce practically indeterminate, unpredictable outcomes. The most complex system of systems that humans have ever engineered. More misguided regulation can make the system more fragile, not less. Less is in fact more. More local failures – bonfires – should be allowed to take their natural course, than fixes that increase the risk of a wider system failure – a conflagration or forest fire. Remember Darwin got his original “survival of the better suited” model from economics – Malthus.

Experience and prudence at the (local) operational management level are more valuable than (wider) externally imposed rules. And experience means history – knowing, understanding and learning from history. History understood on both conservative and revolutionary “occupy wallstreet” /”anti-capitalist” sides of any debate.

Enforcement of law (regulation) remains key, but with simpler clearer (moral principal) rules rather than many fine detailed regulations, it is much easier to punish transgressors “pour encourager les autres”. The rule of law rather than the “rule of lawyers”.

Niall Ferguson’s 2nd BBC R4 Reith Lecture “The Rule of Law and its Enemies – #2 The Darwinian Economy” from the New York Historical Society.

[And Post Note : George Monbiot tweets his complaint at the “idiots” responding to his latest post-Rio piece. No time for detailed review and comment this time – but it’s the same argument. It’s a predictably failed attempt at too much big governance of the most complex system – humans and the ecosphere. Local application of “values” much more likely to work – but that’s real values based on historical knowledge, not just individual interpretation of scientific claims and myths. Better to understand why Rio failed, than simply blame and criticise “everyone” for its failure George.

I’m guessing these are the 516 (at the last count) idiots George is referring to ?

“The world has grown weary of the environmentalists, their sick destructive political agenda and their frankly ridiculous hysteria.”

Though you’d have to agree George’s own tone is so melodramatic and OTT. If ever a debate needed some reasonable wisdom injected into it. A pox on both their houses.]

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