“In general, markets have well-known inefficiencies. One is that transactions do not take into account the effect on others who are not party to them. These so-called externalities can be huge. That is particularly so in the case of financial institutions. Their task is to take risks, and if well managed, to ensure that potential losses to themselves will be covered. To themselves. Under capitalist rules, it is not their business to consider the cost to others. Risk is underpriced, because systemic risk is not priced into decisions. That leads to repeated crisis, naturally. This inherent deficiency of markets is well known.”
Book:Hopes and Prospects
