Extraordinarily timely Taleb essay on Edge.org:
Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let’s face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).
He actually is turning his attention to generating constructive advice for “how to live in a world we don’t understand”, but not without a few shots at the French, Ben Bernanke, Nobel Prize-winning economists and of course Wall Street along the way:
It appears that financial institutions earn money on transactions (say fees on your mother-in-law’s checking account) and lose everything taking risks they don’t understand. I want this to stop, and stop now— the current patching by the banking establishment worldwide is akin to using the same doctor to cure the patient when the doctor has a track record of systematically killing them. And this is not limited to banking—I generalize to an entire class of random variables that do not have the structure we thin[k] they have, in which we can be suckers.