One of my regular reads is former BT futurologist Peter Cochrane's Blog on the technology news website silicon.com. A recent posting of his provides food for thought on the current economic crisis, some sections I quote here:
Where do these times of monetary and market instability come from? There appears to be a limited number of fundamental mechanisms over and above human ignorance, greed and stupidity.
First, I would cite the fundamental tenets and assumptions of economic theory that are obviously wrong:
1) Infinite resources - Not true for the atoms on this finite planet.
2) Infinite markets - Not true for a finite population and ecosystem.
3) Linear channels - Nothing to do with markets is wholly linear.
4) Continuous growth - Was never, and never will be, possible
5) Known behaviours - People and markets are increasingly unpredictable.
6) Understandable - Probably beyond the grasp of humankind.
Second, I think we can identify a set of new and progressively growing factors of increasing influence:
1) Complexity - Managers and people no longer understand products.
2) Connectedness - Everything is now related and not isolated or standalone.
3) Scale - Everything is now huge and networked globally.
4) Machines - They perform more trades than people.
5) Fundamentally non-linear - Chaotic and probably beyond human control.
6) Short-termism - The focus is on the immediate and making money now.
7) Speed - ICT has improved speed and removed latency.
The first set of factors set the scene for beliefs and the illusion of understanding, while the second present ideal components for the occurrence of one economic crisis after another. Perhaps the most critical, given (5) and (6), is the reduction of latency (7) as a prime factor in a world of non-linearity, chaos and strange attractors.
Read the full article here: Peter Cochrane's Uncommon Sense