Financial Bubbles – Do We Understand The Enough To Regulate?

An attorney/law professor friend posed these questions as part of a dialogue around complexity and regulation. They are a bit more tricky than they seem at first blush…what do you think?

“There are two questions. The first is really whether we understand the forces well enough to regulate them. Regulation is a function of prediction; prediction is a function of observed regularity; observed regularities invoke the problem of scientific (not legal) causation; causation returns us to the question whether the human system being analyzed is capable of being reduced to helpful predictive models. The second question is: Who does the understanding? What we are dealing with instead is a crisis of confidence in those who purport to be experts in what we cannot fathom merely through common sense.”

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