The original article appears on BloombergView and is available here. The author is Mark Buchanan.
Humans have a terrible track record of predicting financial crises in time to fend them off. Some computer scientists think that algorithms might help.
Given the right information, some crises can be foreseen. In “The Big Short,” Michael Lewis told the story of the scattered few who saw the imbalance growing in the mortgage market and profited as a result. Over decades, academic research has shown that many banking crises come with early warning signals, such as rapidly increasing debt and leverage. Yet economists and policy makers routinely miss such danger signs, in part because the financial world is so complex.