Making Finance boring

Two of my close friends sent me this link to the New York Time .The post basically says that we ended up in this financial crisis because smart-guys ended up in the field of Finance. This is not the first time I have heard this. Nobel Laureate - Paul Krugmen has been talking about making banking boring.

What if the Smart Guys, referred to by Calvin Trillin in his post, went into the bio-tech industry and created a monster that ended up eating the world OR if they went into material sciences and ended up creating a different kind of nuclear bomb in search of alternative energy.

The problem is that smart guys are capable of doing *extreme* things successfully more so than other normal guys and they need to be regulated in all fields. Regulation failure was the key problem in my opinion. Assuming that the markets are perfect and that they would behave rationally was the biggest mistake that led to the crisis. Markets are made up of people and people have Animal Spirits . However hard we try to respond to things rationally like Captain Spock , we have ultimately shown that over period of time we behave just like how we behaved centuries ago.

The key to avoid any crisis, such as Financial crisis, is to not let a system go unmonitored for an extended period of time . Although the oversight and sometimes the inefficiency added by such monitoring is costly incrementally, In the long run, it acts as a good insurance policy against a systematic failure.