Miller & Rosenfeld on Intellectual Hazard

Intellectual Hazard: How Conceptual Biases in Complex Organizations Contributed to the Crisis of 2008, by Geoffrey P. Miller, New York University - School of Law, and Gerald Rosenfeld, New York University - School of Law, was recently posted on SSRN.  Here is the abstract:

This paper identifies an important but previously unrecognized systemic risk in financial markets: intellectual hazard. Intellectual hazard, as we define it, is the tendency of behavioral biases to interfere with accurate thought and analysis within complex organizations. Intellectual hazard impairs the acquisition, analysis, communication and implementation of information within an organization and the communication of such information between an organization and external parties. We argue that intellectual hazard was a cause of the Crisis of 2008 and suggest that this risk may be an important factor in all financial crises. We offer tentative suggestions for reforms that might mitigate intellectual hazard going forward.