Taleb spotting! Is late, obviously, Baruch is famously behind the curve on these meme things. HT alert Felix commenter Alan , (Felix is it OK to borrow one of your readers? I don’t know the bloggiquette, and reason if you haven’t put it up yet you won’t at all). An entertaining “fireside” chat between Taleb and that Robert Shiller bloke at the New Yorker gabfest early last month.
It’s entertaining to watch Taleb steal the show with his uncompromising animosity for economists, central bankers and regulators. It’s a reminder why we like him so much. Shiller ends up in the shade a bit; he is relatively more traditionalist, a bit of a trimmer. It is a shame, for if we are going to move to a more redundant, less optimised, global trading system, in a real, concrete way, we probably need more Shillers than we do Talebs. Reforming the system from within, it strikes me, is more likely to make progress than arguments of those determined to be, in bien pensant opinion, “flakes”.
I don’t think Taleb is a flake; he is right in his key point, that we are more and more susceptible to tail events. The next one will likely be much, much worse, as our defences will be lower, our treasure will be spent. Then we may finally have the political will to remove or limit leverage in our system, pace Taleb. The danger is of course that by then it may not matter so much.
As things start to return to “normal”, and equity and debt markets recover, the ability to do anything radical disappears. More importantly, the banks are returning to “profit” (note inverted commas) and the moment for breaking their stranglehold on the US Treasury and financial reform seems to be passing. That said, it may still be possible to do some of the things we need to do; I wouldn’t want the perfect to become the enemy of the good.
Another favourite moment: Taleb’s metaphor for monetary policy as ketchup, and the risk that expansionary policies suddenly gain traction at the wrong moment. Baruch is reminded of the childhood rhyme “when you shake the ketchup bottle, none’ll come; then the lot’ll”
As an extra bonus, here Baruch’s favourite economist joke:
A shipwreck victim washes up on an unknown South Seas island, one with a surprisingly developed economic system, if based on cannibalism. Wandering penniless through the local meat market, he notices the stall selling human brains in many appetizing forms has an interesting pricing scheme; the sign over 3 glistening, bloody buckets of brains reads:
Accountant brains: 15 cowrie shells/kilo
Lawyer brains: 25 shells/kilo
Economist brains: 50 shells/kilo.
“Hey,” says the traveller, “I guess those economist brains must be pretty special. What is it, do they like, taste better?”
“No way dude,” says the brains butcher. “You know how many economists you have to kill to get a kilo of brains?!”