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Wednesday, March 04, 2009

Radical idea- let's all know what goes.

Daniel Roth in Roadmap for Financial Recovery: Radical Transparency Now! in Wired proposes radical transparency for financial markets as one needed response to the current breakdown. Governments in a wide range of fields could heed his suggestion that we should stop treating information in the hands of regulators like a temple secret, only accessible and to be interpreted by the temple priests:
"..we need to rethink our entire philosophy of regulation. Instead of assigning oversight responsibility to a finite group of bureaucrats, we should enable every investor to act as a citizen-regulator. We should tap into the massive parallel processing power of people around the world by giving everyone the tools to track, analyze, and publicize financial machinations. The result would be a wave of decentralized innovation that can keep pace with Wall Street and allow the market to regulate itself—naturally punishing companies and investments that don't measure up—more efficiently than the regulators ever could.

The revolution will be powered by data, which should be unshackled from the pages of regulatory filings and made more flexible and useful. We must require public companies and all financial firms to report more granular data online—and in real time, not just quarterly—uniformly tagged and exportable into any spreadsheet, database, widget, or Web page. The era of sunlight has to give way to the era of pixelization; only when we give everyone the tools to see each point of data will the picture become clear. Just as epidemiologists crunch massive data sets to predict disease outbreaks, so will investors parse the trove of publicly available financial information to foresee the next economic disasters and opportunities.

When data is kept under lock and key, as mysterious as a temple secret, only the priests can read and interpret it. But place it in the public domain and suddenly it takes on new life. People start playing with the information, reaching strange new conclusions or raising questions that no one else would think to ask. It is impossible to predict who will become obsessed with the data or why—but someone will.....

Keeping the rest of us safe can no longer fall to government regulators alone. But if we enable a system in which everyone is a regulator, there just might be enough eyes, enough checks and balances, enough promising DIY economists out there to make sure the financial world doesn't innovate the real world into depression ever again. Brandeis argued that electric lights were the best police force. Now it's time to give everyone a flashlight."

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