The Illusion of Control

Systemic Risk Centre Event

Date: 15th November 2022   Time: 6:45-8:00pm GMT
Venue: MAR.1.08, 1st floor, Marshall Building, LSE (map)
Speaker: Jón Daníelsson (SRC/LSE)
Chair: Charles Goodhart (FMG/LSE)

Join us for the launch of Jón Daníelsson’s new book which challenges the conventional wisdom surrounding financial risk, providing insight into why easy solutions to control the financial system are doomed to fail.

Finance brings prosperity and danger. We use measurements of risk to try and control the dangers of investments while maximizing our growth. Current strategies rely on mathematical techniques and historical data to predict future risk, but ignore the human component, failing to take into account the nature of risk inherent in the system.

Jón Daníelsson argues that critical risk is generated from within, through the interactions of individuals and perpetuated by their beliefs, objectives, abilities, and prejudices. He asserts that the widespread belief that risk originates outside the financial system frustrates our ability to measure and manage it, and the likely consequences of new regulations will help alleviate small-scale risks but, perversely, encourage excessive risk taking. Daníelsson uses lessons from past and recent crises to show that diversity is the best way to safeguard our financial system.

The Illusion of Control: Why Financial Crises Happen, and What We Can (and Can't) Do About It  is published by Yale University Press and was included on the Financial Times' list of Best books of 2020 in Economics.

Jón Daníelsson (@JonDanielsson) is Reader in Finance at LSE and Co-Director of the Systemic Risk Centre. His research interests cover systemic risk, financial risk, econometrics, economic theory and financial crisis. He has written two other books, Financial Risk Forecasting and Global Financial Systems: Stability and Risk and published a number of articles in leading academic journals. Jón writes regularly about his research on and he blogs on VoxEU.

Charles Goodhart was appointed to the Norman Sosnow Chair of Banking and Finance at the London School of Economics in 1985, until his retirement in 2002 when he became Emeritus Professor of Banking and Finance. Prof. Goodhart helped to found, with Prof. Mervyn King, the Financial Markets Group at London School of Economics, which began its operation at the start of 1987. He was elected a Fellow of the British Academy in 1990, and awarded the CBE in 1997, for services to monetary economics.



The Illusion of Control