Copyright 2010 Harvard Business School PublishingAll Rights Reserved HARVARD BUSINESS REVIEW
September 2010
SECTION: FEATURE No. BR1009
LENGTH: 161 words
The Idea in Brief
Decentralized individual judgment and initiative are essential to the success of the modern capitalist economy.At the same time, rules and centralized systems are needed to bring order and prevent waste. Getting the balance between these two modes of decision making right is a constant struggle. But managers, policy makers, and others are aware of the conflict and have experience managing it. In recent times, though, a new form of centralized control has taken root that is the work not of old-fashioned autocrats, committees, or rule books but of statistical models and algorithms.This has been especially true in finance, where risk models have replaced the judgments of thousands of individual bankers and investors, to disastrous effect. The problem with the statistical approach is that it cannot adequately account for the uncertainty and idiosyncrasies inherent in economic decisions.What finance in particular needs is a return to judgment.LOAD-DATE: August 30, 2010
Terms and Conditions Privacy Policy
Advertisement
More Articles