Context:
A study by the Reserve Bank of India (RBI) has spoken about the possibility of capital outflows to the tune of $100 billion (around Rs 7,80,000 crore) from India in case of a major global risk scenario or a “black swan” event.
Relevance:
GS III- Indian Economy
Dimensions of the Article:
- What is a ‘black swan’ event?
- When did the term originate?
- When have such events occurred in the past?
What is a ‘black swan’ event?
- A black swan is a rare, unpredictable event that comes as a surprise and has a significant impact on society or the world.
- These events are said to have three distinguishing characteristics –
- They are extremely rare and outside the realm of regular expectations;
- They have a severe impact after they hit;
- They seem probable in hindsight when plausible explanations appear.
When did the term originate?
- The black swan theory was put forward by author and investor Nassim Nicholas Taleb in 2001, and later popularised in his 2007 book – The Black Swan: The Impact of the Highly Improbable.
- The Sunday Times described his work as one of the 12 most influential books since World War II.
- The term itself is linked to the discovery of black swans.
- Europeans believed all swans to be white until 1697, when a Dutch explorer spotted the first black swan in Australia.
- The metaphor ‘black swan event’ is derived from this unprecedented spotting from the 17th century, and how it upended the West’s understanding of swans.
When have such events occurred in the past?
- 2008 global financial crisis – a black swan event triggered by a sudden crash in the booming housing market in the US.
- The fall of the Soviet Union, the terrorist attack in the US on September 11, 2001, also fall in the same category.
-Source: Indian Express
