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Richard Bookstaber's arguments in 'Demon of Our Own Design' for how to reduce the frequency and severity of systemic financial crashes can be oversimplified to

Richard Bookstaber's arguments in 'Demon of Our Own Design' for how to reduce the frequency and severity of systemic financial crashes can be oversimplified to loosening the coupling between systems, and reducing the complexity of systems. The natural incentives of financial firms are toward coupling that they can profit from and complexity that they can charge for. Alan Greenspan eventually figured out that letting the firms police themselves probably isn't actually a good idea [0]. I may have targeted the wrong top two deregulatory initiatives, but I'm pretty confident that removing and failing to enforce existing regulations was a significant contributor to the crisis. It's not that we don't know how to avoid crashes, it's that it is less profitable (for some) to do so. [0] https://www.theguardian.com/business/2008/oct/24/economics-creditcrunch-federal-reserve-greenspan https://www.theguardian.com/business/2008/oct/24/economics-c...

ch4s3 9y ago
I don't disagree with the sentiment, just with the assertion about the particular piece of regulation.
- pjmorris 9y ago
  GS was a bad example anyway; my main point was that we achieved financial system stability for a long period, correlated with financial system regulation.
  - ch4s3 9y ago
    I mean, there was a huge slump in the 70s with the oil crisis and other factors leading to stagflation. https://www.investopedia.com/articles/economics/08/1970-stagflation.asp https://www.investopedia.com/articles/economics/08/1970-stag... Sensible regulation will buy us a lot, but you can't prevent people from doing big stupid things forever.
  - runeks 9y ago
    > […] my main point was that we achieved financial system stability for a long period […] What period was that, exactly?
    - pjmorris 9y ago
      For the US, approximately 1930-2000. Have a look at the 20th century list of financial crises on Wikipedia [0], and filter for US banking. [0] https://en.wikipedia.org/wiki/List_of_economic_crises https://en.wikipedia.org/wiki/List_of_economic_crises

ch4s3 9y ago

I don't disagree with the sentiment, just with the assertion about the particular piece of regulation.

pjmorris 9y ago
GS was a bad example anyway; my main point was that we achieved financial system stability for a long period, correlated with financial system regulation.
- ch4s3 9y ago
  I mean, there was a huge slump in the 70s with the oil crisis and other factors leading to stagflation. https://www.investopedia.com/articles/economics/08/1970-stagflation.asp https://www.investopedia.com/articles/economics/08/1970-stag... Sensible regulation will buy us a lot, but you can't prevent people from doing big stupid things forever.
- runeks 9y ago
  > […] my main point was that we achieved financial system stability for a long period […] What period was that, exactly?
  - pjmorris 9y ago
    For the US, approximately 1930-2000. Have a look at the 20th century list of financial crises on Wikipedia [0], and filter for US banking. [0] https://en.wikipedia.org/wiki/List_of_economic_crises https://en.wikipedia.org/wiki/List_of_economic_crises