I was very struck by a piece by Steve Randy Waldmann at Interfluidity yesterday, entitled Capital Can’t be Measured. He is basically arguing that modern financial institutions are sufficiently complex that the concept of their “capital” is subject to measurement errors of the same order of magnitude as the capital itself. This rang true to me, and put into words something that had nagged at me in reading about financial reforms, but had not come clearly to the surface of mind.
read more
