“Disaster myopia”: Failing to learn the lessons of increased uncertainty
Wednesday, 23 February, 2011 2 Comments
From Andy Haldane at Bank of England in ft.com:
People tend to forget events that happened a long time ago and give much less weight to the probability that these will happen again. This “disaster myopia” led to models that hid the true probability of some disasters. A further look back into history would have shown fluctuations in UK GDP four times greater than that of the past 10 years, that of unemployment five times greater, that of inflation seven times greater and that of earnings 12 times greater.
The following is an extract from (with link to) my original article