The former Bank of England Governor Mervyn King took a well-aimed broadside attack at the Basel capital regime as an over specified monstrosity (my words, not his) in his 2012 book titled The End of Alchemy. That book is a more expansive and much easier to read treatment of ideas found in BofE Andrew Haldane’s rambling presentation titled “The dog and the frisbee” that caused something of a sensation in the financial regulatory community at the 2012 Federal Reserve Conference in Jackson Hole, Wyoming. Haldane convincingly described the denominator of the Basel capital ratio, the potential loss estimate, as essentially unworkable, and demonstrated that simpler heuristics with a market edge to them (e.g. financial leverage) have better explanatory power.
With co-author John Kay, Mervyn King in 2020 applies the same critical lens to the entire foundation of microeconomics and decision making in Radical Uncertainty Decision Making Beyond the Numbers. If you enjoy history and economics, this might be a very enjoyable book for you.
The origins of the ‘probabilistic turn’ in human reasoning began with the study of games of chance. Kay and King usefully review some classic historic examples (e.g. Monty Hall’s Let’s Make a Deal! TV show) as a means of providing intuition to conditional probability and Bayesian statistics without the usual deluge of math.
They describe a battle for the very heart and sole of microeconomics that arose in the 20th century as concepts from probability were applied to economic reasoning. Per Kay and King, the wrong guys won.
Keynes connected true or radical uncertainty to the entrepreneurial spirit. Kay and King make that same connection to Steven Jobs and similar titans of business, doubting that the entrepreneurial spirit can at all be described by maths.
Not content to hurl well aimed mud at Milton Friedman and the Chicago School, Kay and King review newer alternate theories of decision making under conditions of radical uncertainty when the very idea of forming a subjective probability distribution is utterly futile. An example referred to throughout the book is the decision Barack Obama faced when deciding to authorise what proved to be the successful raid on Bin Laden’s suspected hideout.