writes: The Economist has an interesting essay that gives some perspective on our economic situation. From the article,
THE revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature. So wrote Peter Bernstein in his seminal history of risk,"Against the Gods".
Wall Street quants have claimed over the past decade that they had the ability to quantify financial risk down to several decimal places. The Great Recession has shown their claims to be absurd. Wall Street's supposed mastery of risk allowed financial institutions to package risky loans as derivatives that ostensibly had definite and identifiable risk profiles. Our recent financial collapse shows the limits of our beautiful and elegant mathematical models of the economy.