Certainty is a source of much worse systemic risks than uncertainty

Sir Sheila Dow in “A strong argument for pluralism in economic reasoning” January 2, writes “Predictions in times of particular uncertainty can shift dramatically… with serious consequences”. She is right but let us not forget that times of particular certainty like those when everyone from the regulators, the sophisticated investors and the small investors believed in the credit rating agencies generate even worse systemic risks.

If we cannot guarantee pluralism let us at least combat monism

Regulators crafting plurality? Not likely.

Sir in “Why free markets must be defended”, December 27, you write “What was shocking was the failure of disciplined pluralism” and that now “Financial regulators must shoulder the difficult and technical task of crafting the rules that will ensure that there is no repeat”.

A difficult task indeed, especially considering that it was the financial regulators who exercising some not so transparent powers over the markets, were responsible for putting dampers on plurality, with their creation of some truly mumbo-jumbo minimum capital requirements for the banks and the empowerment of the credit rating agencies.

If you want plurality in the market you need to start by stimulating plurality among regulators. Anyone wanting to defend the free markets but that does not realize how imprisoned they really are, is not an effective defender of the market.