A December 10, 2008 Press Release of the Casualty Actuarial Society stated, "An over-reliance on models used in securitizing mortgage risks and a failure to question basic assumptions played a role in the subprime crisis...the models overlooked a number of things...that differences in the size of downpayment...increasing the pool of subprime borrowers...changing the terms of mortgages...would have a major impact."
Economic and financial models have proven to be seriously inadequate for decades. Actuarial and complexity science models have been precluded from serious use in much public policy decisionmaking. As a result the analysis being utilized by policy makers is seriously flawed.
It is no longer acceptable to ignore the advanced modeling which is available to supplement the flawed and outdated models being used in public policy analysis. The global economic collapse was a scenario that either actuarial or complexity science models could have generated before we were immersed in red ink. They remain available to get us out of the mess and avert the next one.
See my website, paradigmactuaries.com, for more.
Lee
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