Abstract :
Innovation of any sort brings a combination of benefits and dangers. The goal of individuals, organizations, and society as a whole is to reap the benefits and control the dangers. With respect to technical innovation (i.e., advances in science and engineering) the situation is fairly clear. There is a possibility of nuclear, biological, or environmental disasters. These dangers are regulated by nation states using mechanisms that are fairly effective. Financial innovations also bring benefits and dangers. The potential for financial disasters exists, and the dangers need to be regulated. Unfortunately, some of the dangers are not well understood. Other dangers are regulated either ineffectively or not at all. The possibility for serious and widespread economic crises exists. A severe credit crunch is currently underway and has the potential to become a full-blown crisis. If a financial disaster occurs its epicenter will probably be in the United States but its impact will be felt everywhere. This column presents the first of two articles on this situation.
