Wednesday, April 08, 2009

Principles for a Black Swan-Free World

NNT's Top 10:

  1. What is fragile should break early while it is still small. Grow nothing too big to fail.
  2. No socialisation of losses and privatisation of gains.
  3. Find the smart people whose hands are clean.
  4. No incentives without disincentives. Don't incentivize risk where you don't want it.
  5. Counter-balance complexity with simplicity.
  6. Do not give children sticks of dynamite, even if they come with a warning . Ban risky financial products
  7. Only Ponzi schemes should depend on confidence.
  8. The debt crisis is not a temporary problem, it is a structural one.
  9. Economic life should be definancialised.
  10. Make an omelette with the broken eggs. Rebuild the whole system.

Update: A critique of the recommendations from freeexchange.

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