The recent events that have shaken the banking sector may have a far-reaching impact on the economy and our lives. Can these crises be foreseen and avoided? In this episode of La Plaça, Xavi Viñolas, editor of 11Onze, analyses retrospective economic predictability through the black swan theory.

Is the current economic model reliable? One might think that we go from crisis to crisis in a cyclical concatenation of inevitable catastrophic events in the financial markets. But are these economic cataclysms unpredictable, and can the economic analysis be improved to predict the future?

In economics, the black swan theory is a metaphor that refers to highly improbable events that occur by surprise and have a large negative impact on economies. They are characterised by retrospective predictability, i.e. some factors explain why they occurred and how they could have been avoided.

Anticipating black swans

Any type of investment is exposed to possible black swans that negatively affect market performance. It is therefore essential to have a diversified and structured portfolio with different types of assets that can act as counterweights in case of a sudden change in the economic outlook triggered by such an event.

That said, and given that black swans are increasingly common, Viñolas suggests that “perhaps it is the economic model itself that should be questioned“, and continues, “banks have become accustomed to privatising profits and socialising losses. Taking the risk element out of risky investments”, therefore, they have little incentive to prevent these events from occurring, since others end up paying the consequences, i.e. us, the taxpayers.

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