Andy Haldane:: Still making sense – ‘Central banks should admit their mistakes’
Monday, 27 August, 2012 Leave a comment
My admiration for Andy Haldane‘s “thought leadership” grows with every paper, article, presentation or speech…he isn’t misled by symptoms because he understands what lies at the root of our global financial “difficulties”. After all, if a Director of the B of E is going to publish a paper on systemic risk, with a Professor of Zoology you would need to make sure you were on pretty solid ground, OR accept that the men in white coats could come to take you away at any time!!!
What WE need now is for such influential individuals to embrace this new thinking and to lead the organisations, with which they have influence, away from their point(s) of “critical complexity” in order that they can build the RESILIENCE necessary for times of such financial volatility. Whilst in his role at Bank of England, he hasn’t shirked from communicating a fundamental lesson about complexity, the threat of contagion, systemic risk and the fact that we are dealing with uncertainty (unknowns) as distinct from risk (knowns) – on the basis of the available evidence, this is considerably more than can be said for many in the risk management business within financial services!
These will be the organisations best positioned to lead change, to “survive” the trauma of the approaching tipping point and to thrive in a post critical environment…likely to be a very different, more fragmented, financial landscape:
“The notion of not knowing, of imperfect information, of uncertainty (as distinct from risk) got lost from economics and finance for the better part of 20 or 30 years. In some ways, we’re just starting to rediscover that now, of how little we really knew, both pre and post-crisis, of how this complex adaptive economic and financial system really behaves..
…we forgot the key part, which is that the models are only true if the assumptions that underpin those models are also true. And we started to believe that what were assumptions were actually a description of reality, and therefore that the models were a description of reality, and therefore were dependable for policy analysis.
With hindsight, that was a pretty significant error…”