Kicking the Can Down the Road – A Follow-Up
In the last post, I ventured a guess at the ultimate outcome of the European sovereign debt crisis. My guess was (and is) that the Europeans will find some way to manage, if not solve, their problem, and they will kick the problem down the road where it will ultimately end up worse.
Richard Fernandez writes about Nassim Taleb, one of my personal favorite modern intellectuals, and notes that Taleb thinks that this “kicking the can” is a “normal” state of affairs:
Nassim Taleb, writing in Foreign Affairs, describes why a Black Swan came to Cairo without anybody noticing and in general why opinion leaders keep getting caught on the wrong foot by the arrival of “large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.” The fall of the Berlin Wall was a surprise. The 2008 meltdown was a surprise. The Arab Spring was a surprise. “Why is surprise the permanent condition of the U.S. political and economic elite?”
The answer, he argues, is that the elites won’t see them coming rather than that they can’t. Part of the problem is the consequence of their own damping. By attempting to centrally manage systems according to some predetermined scheme they actually store up volatility rather than dispersing it. By kicking the can down the road they eventually condemn themselves to bumping into a giant pile of cans when they run out of road.
That is a very good way to put it, isn’t it?
What is needed is a system that can prevent the harm done to citizens by the dishonesty of business elites; the limited competence of forecasters, economists, and statisticians; and the imperfections of regulation, not one that aims to eliminate these flaws. Humans must try to resist the illusion of control: just as foreign policy should be intelligence-proof (it should minimize its reliance on the competence of information-gathering organizations and the predictions of “experts” in what are inherently unpredictable domains), the economy should be regulator-proof, given that some regulations simply make the system itself more fragile.
The bolding in the above passage is mine. I particularly like the idea of resisting the illusion of control, as the limits of human abilities are made manifest only by their failures. And failures benefit no one.
The second part, or the idea that the economy should be regulator-proof, reminds me of Adam Smith’s admonition that, however much we may strive to have a government of the best people, we must above all protect ourselves from a government of the worst people.
In other words, there must be some things that are off-limits to government, and therefore insulated from its bad choices, which would be binding on the entire society.