I want to commend an excellent post by Jeffry Snider at RealClearMarkets to your attention. The post begins with the value of error in the decision-making process but actually is pointing out the necessity of errors in producing good decisions. Here’s a snippet:
There is efficiency in seeming randomness. In the natural world, there is tendency for physical forms to find the most efficient shapes possible. The sphere, for example, is the most efficient distribution of forces which the material in it can displace maximum volume for finite quantities. The soap bubble is a perfect example of that. Economies and other complex systems are in many important ways similar; always searching for the most efficient manner of distribution given finite quantities of everything. There is no way to find such efficiency and thus true progress at the direct exclusion or dismissal of error. The Federal Reserve, had it existed in 1879 and assigned itself the task under its current rules, would have told Edison to stop after only a few tries at the light bulb and instead use whatever he had at that point. In other words, monetary intrusion is a purposeful deformation of the efficient shape because economists have assumed they can, with no wisdom of the crowd, define better what is and is not error and prudence.
Read the whole thing.
We’d better hope that errors are a necessary part of good decision-making. We’ve made some whoppers in recent years. I hope we can benefit by them. I see few signs that’s the case.