The Fiscal Stability Report released by the Reserve Bank of India earlier this week made headlines for all the insights it gave into the state of the Indian financial system. But away from all the analytics, the RBI Governor turned to the best selling author Nassim Nicholas Taleb and his book, ' Bed of Procrustes', to sum up the complexity of the markets and the challenge in monitoring and regulating the system. " Ensuring financial stability cannot be a formulaic rule- based task," Governor Duvvuri Subbarao wrote in the foreword to the 97- page report, which was released June 14. The endeavour for the policy makers, he said, should be to not get trapped in " commoditised ideas, reductive categories and prepackaged narratives" - trying to fit everything to ' The Bed of Procrustes'. It was a second instance in recent times that the RBI invoked the writings of Taleb, the Lebanese American philosopher, essayist and practitioner of mathematical finance. ' The Bed of Procrustes -- Philosophical and Practical Aphorisms' is a collection of aphorisms which express Taleb's ideas. In Greek mythology, Procustes was a bandit who abducted travellers, offered them a generous dinner and a special bed to spend the night. But he wanted the bed to fit the traveller to perfection. Those who were too tall had their legs chopped off with a sharp hatchet; those who were too short were stretched. Procurstes was eventually decapitated and " fitted" into his own bed. So it is in the real word today, explains Taleb. Humans get modified to fit technology, reality is blamed for not fitting into models built to explain the reality - with disastrous consequences. The aphorisms capture the idea - brevity, beauty and all - like this one: " Modernity's double punishment is to make us both age prematurely and live longer." Those facing the effects of the RBI punishment in form of repeated rate hikes could note this one from Taleb's book: " If your anger decreases with time, you did injustice; if it increases, you suffered injustice." The RBI referred to Taleb also on August 24 last year, when it cautioned against " black swans" emerging in the nature of global shocks that could transmit quickly to the domestic real economy. The remarks came as the RBI released its annual report for 2009- 2010. The " black swan" describes unexpected surprise events, like the rare black swan. The term was first popularised in the book of the same name by Taleb. A former RBI official said this is probably the first time that such references, interesting and explanatory in their own way, have appeared in what otherwise are detailed if dreary RBI documents and statements.
Fres Press Journal
No comments:
Post a Comment