#AI OpenAI ChatGPT: In Geocentric and Heliocentric terms do risk to bank system revolve around what’s perceived risky or what’s perceived safe?

I’ve been arguing for decades against bank regulations based on that what’s perceived as risky is more dangerous to our bank systems.

For instance, 2012, Financial Time’s chief economics commentator Martin Wolf gave a testimony to that  effect. 

The illusion of validity, outcome bias and the availability heuristic, also known as availability bias, affects human intelligence.

In 2019, responding to a request for commentaries I sent a letter to the Financial Stability Board that opened with "I feel like a heliocentric Galileo writing to a geocentric Inquisition". My letter was received, but never answered.

I asked ChatGPT:

"Two options:

A: The most dangerous risks to banking system revolve around what’s perceived as risky

B: The most dangerous risks to banking system revolve around what’s perceived as safe

To which option respectively do the terms geocentric and heliocentric best apply?"

ChatGPT answered:

Option A: "The most dangerous risks to banking system revolve around what’s perceived as risky" can be compared to the geocentric model of the universe. In the geocentric model, the Earth was believed to be the center of the universe, and all other celestial bodies revolved around it. This model was widely accepted for centuries, despite evidence to the contrary, because it aligned with people's perceptions and beliefs. Similarly, in the banking system, if risk is perceived in a certain way, it may be accepted and even encouraged despite evidence to the contrary.

Option B: "The most dangerous risks to banking system revolve around what’s perceived as safe" can be compared to the heliocentric model of the universe. In the heliocentric model, the Sun was believed to be the center of the solar system, and all planets, including Earth, revolved around it. This model challenged the geocentric model and required a significant shift in thinking and understanding. Similarly, in the banking system, if risk is perceived as safe, it may lead to complacency and a failure to recognize potential risks, leading to dangerous consequences."

Note: The answers are copied exactly from those given to me by ChatGPT

Comment: You tell me. Don't I have an ally now? Will OpenAI also be silenced by the Neo-Inquisition?

Here my many other questions to ChatGPT – Grok on bank regulations

Might “availability heuristic” “availability bias” explain the loony risk weighted bank capital requirements?

According to Wikipedia:

"The availability heuristic, also known as availability bias, is a mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method or decision. The availability heuristic operates on the notion that if something can be recalled, it must be important, or at least more important than alternative solutions which are not as readily recalled. Subsequently, under the availability heuristic, people tend to heavily weigh their judgments toward more recent information, making new opinions biased toward that latest news.

The availability of consequences associated with an action is positively related to perceptions of the magnitude of the consequences of that action. In other words, the easier it is to recall the consequences of something, the greater those consequences are often perceived to be. Most notably, people often rely on the content of their recall if its implications are not called into question by the difficulty that they experience in bringing the relevant material to mind"

Could that explain why the world, so submissively, has accepted the regulators' bank capital requirements based on that those excessive exposures that could be dangerous to bank systems are built-up with assets perceived risky, and not with assets perceived as safe? 

Has the immediate example of the certainty of Monday Morning Quarterbacks, informing them about the awful consequences of what was very risky after the game, totally blocked regulators from even looking at what was considered as very safe before the game?

Richard Thaler
Cass Sunstein
Daniel Kahneman

PS. Here are other explanations