Conclusions—Delusions of Competence

Robin Pearson ()
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Robin Pearson: University of Hull

Chapter Chapter 9 in Delusions of Competence, 2022, pp 103-112 from Palgrave Macmillan

Abstract: Abstract The history of Lloyd’s between the 1970s and 1990s highlights the dangers that can be faced by complex financial systems from entrenched beliefs in the competence of experts and the efficacy of self-governance. The crisis involved more than contagious speculation, excessive catastrophe and liability losses, or a series of frauds. The reforms of the early 1980s may have temporarily alleviated some of the problems of malfeasance and misgovernment, but the underlying problem remained—namely an unwarranted faith in those involved in the process by which risks were insured and reinsured. Multiple delusions of competence were at work. Underwriters were deluded about their competence to assess categories of risk with which they were not familiar. Those governing Lloyd’s were deluded about the competence of market practitioners and about their own competence to manage them. Legislators were deluded about the virtues of self-regulation and the competence of insider experts.

Keywords: Tacit knowledge; Expert competence; Financial regulation; Ostrich effect; Cognitive dissonance (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palscp:978-3-030-94088-1_9

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DOI: 10.1007/978-3-030-94088-1_9

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