CHAPTER 19
THE FINANCIAL CRISIS AND INFORMATION OVERLOAD
A library of wistom . . . is more precious than all wealth.
—Richard de Bury
The recent breakdown of the nation’s financial sector and the recent events in financial markets worldwide beg a discussion of the role of Information Overload in the context of finance and the economy.
Headlines have made it painfully clear that in the sub-prime mortgage crisis that began in 2006, institutions were unsure of their assets and liabilities. Usually, this would be attributed to an inadequacy of available information, but that’s far from the case here.
Beyond the already outlined losses to productivity that Information Overload causes to our economy, it also has the ability to adversely affect the complex systems that our economy increasingly relies on.
Despite advances in technology, we have yet to create financial systems that are immune to Information Overload. If anything, we have built complex systems for finance, real estate, and banking that have evolved and surpassed our ability to understand them.
This was the case with the recent financial crisis that began in mid-2006, where the new products that had been developed by the financial industry became so complicated that calculating the risks proved impossible for regulatory authorities and consumers. Risks were not transparent for investors, who were not able to see the larger picture and understand what investments were contained in the financial products that were being purchased. ...
