| Look at the collapse of giant financial institutions that | | | | combined to better explain and thus predict human |
| happened in 2008. What is wrong with them? They | | | | behavior, especially, when it comes to human |
| are not new companies and definitely not new in that | | | | interaction in a social and economic set up. It is really |
| business. Some exist for more than a century. | | | | as complex as it seems. When a new policy is applied, |
| Mismanagement? That is definitely the case. But let us | | | | literally no one can anticipate all changes in human |
| evaluate further deep, beyond the management. The | | | | behavior in response to the policy. Some policy |
| human factor. | | | | makers can claim to be able to predict the response. Is |
| There is always cause and effect. Believe it or not, | | | | it true? Predictions are made based on analysis of |
| nature is a balance system. Any disturbances to the | | | | historical data. The important factor in analysis of |
| nature will cause effects. Being part of nature, human's | | | | historical data is the timing and the actual situation |
| life also follows, what I call, cause-and-effect law. | | | | when it happened. As social values changes, the |
| Problems occur when a cause makes many effects. | | | | human behavior can change too. |
| We cannot anticipate all possible effects to overcome | | | | When we talk about financial issues, the object |
| them all. Scientists can minimize possible effects by | | | | remains the same, human. Business and finance as |
| having a series of small scale experiments in | | | | part of it involves human. Monetary policies made and |
| laboratories. All possible effects can be detected so | | | | successfully applied in one country may not have the |
| overcoming adverse effects can be prepared. Isn't | | | | same result when applied in other countries. The |
| that great? | | | | different social and economic condition makes |
| Now, how can economists and policy makers do the | | | | different result. So different social and economic set |
| same? Most likely they can't. What is the difference? | | | | up results in different human behavior in response to |
| The object is different. In a science experiment, the | | | | the same policy. This is the key. Those financial |
| object is human's body or plant or animal. With a logical | | | | institutions must have made lots of analyses. No one |
| thinking the effects of certain treatment applied can be | | | | can better predict what happens recently with them. |
| predicted. Even the behavior of animal can be | | | | What the analysts comment about what happened is |
| predicted. How about human behavior? Many studies | | | | purely based on what already happened. But do they |
| have been made to learn human behavior. There are | | | | foresee this? If it is so easy to know the future |
| theories declared by psychologists or behavior | | | | everybody can easily be rich. As simple as that. If only |
| analysts to predict human behavior. Yet, some | | | | we know that subprime mortgage can definitely cause |
| exceptions happen then new theories are born. | | | | such a chained reaction causing the collapse of world |
| Essentially, human behavior is much unpredictable. | | | | economy, are we brave enough to try implementing |
| I believe there will not be any sets of theories | | | | the policy? |