Analysis of Normal Accidents as described by Richard Bookstaber Essay

Analysis of Normal Accidents as described by Richard Bookstaber - Essay physical exertionThe best that an investor may get out of a bad investment is cost aversion. In the absence seizure of this, the investor may be very certain that he or she would be running at a loss. In some cases, the choice of investment is not necessarily what constitutes a bad investment for an investor. Rather, it is the nuzzle used in investing. So an investor may be selecting the best form of investment but he or she may be approaching the investment wrongly. This is exactly the point outlined by Bookstaber in his book, A Demon of our own. The writer is very concerned about approaches that argon taken by investors because, in his opinion, a series of tightlippedly couplight-emitting diode processes may only lead to normal misadventures, which not as the name suggests, may be very disastrous. Normal Accidents Explained In his writing, Bookstaber describes normal accidents in relation to fiscal forces. The writer first uses scenarios of other forms of forces to explain his arguments of normal forces. The writer notes that if you put in an extra sample light or sensor on a nuclear reactor or an aeroplane, thats one more(prenominal) thing that could fail, causing confusion and a disastrous cascade of cause and effect (Fitch, 2009).In the lyric poem of Fitch (2009), the situation causes investors to bet on stocks, bonds and interest rates, often with a large degree of leverage. The resulting end for such(prenominal) decisions is that there have been derivatives that have led to high levels of complexities in the financial system and this has led to normal accidents (Bookstaber, 2008, pg. 143). The concept of normal accidents as introduced by Bookstaber could, therefore, be related to the everyday concept of displace all of a persons eggs in one basket. It is known that the resulting effect of such an action is that once the basket breaks the fellow losses all the eggs. In the fi nancial sector, once investors move around overconfident in their investment and channel all their funds to a single domain, the resulting effect is tight coupling and complexity Indeed, the combination of tight coupling and complexity is a formula for normal accident especially when the structure of the financial system cannot handle the complexity. (Bookstaber, 2008, pg. 256). Tightly Coupled Processes in the Financial firmament In page 256, introduces a concept of the structure of the system when he says that normal accidents are accidents that are all but evitable as a result of the structure of the system. The idea that this piece of info creates is that normal accidents are actually often influenced by the prevailing financial structures and system. Indeed, it is when the financial sector gets tightly coupled that investment decisions by investors may result in normal accidents.