re: #227 lawhawk

Yep. And instead of admitting that these things were too complicated for them to figure out, they pretended that instruments of such complexity were completely comprehensible by them.

To me, it’s a complexity problem, as Gawande and Dennett have written about. Most of the financial industries theories are recursive, circular reasoning, dependent on individual theorems that cannot be tested except in massive real world application. Common sense should say that mortage defaults are something that have the potential happen in waves, in large numbers— which is exactly what happened.

The outstanding question for me is whether those in the financial industry knew how foolish they were being, or whether the complexity of these instruments is such that it hid the risk from themselves— and that leads to a question of how we recognize overly complex financial instruments and prevent them from blowing up on us.