John Lanchester, on Liaquat Ahamed’s new book, "Lords of Finance": The crucial questions in history often turn out to involve things that people at the time simply did not understand. Sometimes these things were too complicated to be resolved, and sometimes they were so glaringly obvious that they were hidden in plain sight. Sometimes they were both at the same time: horribly complex, horribly obvious. In the buildup to the 1929 crash and the subsequent depression, the linked issues of reparations and the gold standard were at once unfixably complicated and so much at the heart of the system that they were hard to see plainly. The equivalent issue at the heart of the current financial meltdown is that of risk. For reasons to do with a lack of historical awareness, overconfidence, and faulty mathematical modelling, the entire global financial system was built on mistaken calculations about probability.
Heroes and Zeroes |
