Mandelbrot Beats Economics in Fathoming Markets
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Mandelbrot Beats Economics in Fathoming Markets
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Re: Mandelbrot Beats Economics in Fathoming Markets
#2This is a good overview, though as one minor quibble, the critique of "rational agents" is separate from the critique of equilibrium models: even if all economic actors are rational agents, that doesn't imply that everything converges instantly to nice equilibria with an absence of feedback loops, attractors, and the other typical nonlinear-dynamical-system pathologies. In fact most agent simulations in AI that use rational agent models still find all sorts of that weirdness going on.
Re: Mandelbrot Beats Economics in Fathoming Markets
#3It staggers me that so much prevailing thought still leans towards the idea of complex, highly connected systems as inherently stable, with their natural state as equilibrium. It dates back to the victorians, with their "All things Bright and Beautiful" view of god's creation, which was shattered by darwin. How long it takes us to learn the important lessons.
This view was prevalent in the world of ecology for decades, and led to all that guff about "nature's balance" and "spaceship earth" that we had to put up with for so long. It turned out that these ideas were based on falsified studies.
Adam Curtis addressed these ideas and more in his recent series of films, All Watched Over By Machines Of Loving Grace. Specifically, the second episode: "The Use and Abuse of Vegetational Concepts." The other episodes cover Ayn Rand and her effect on US economic policy, and the Selfish Gene theory and its murky origins in the wartorn Congo. And a whole lot of other stuff.
http://en.wikipedia.org/wiki/All_Watched_Over_by_Machines_of...
I highly recommend it, along with his other works, although you should be careful not to suspend your critical faculties in the headlights of his psychedelic filmmaking techniques.
Re: Mandelbrot Beats Economics in Fathoming Markets
#4Wait, did economists think at one point that the distribution of movements in a stock market followed a Gaussian pattern? I mean, amateur statisticians approximate things to Gaussian distributions all the time to make the math easier, but that's hardly a problem unique to economics.
As to the Omori distribution, have they actually succeeded in making forward looking predictions with it, or were they just fitting a model to past data? Even if it is a real phenomenon, I can think of a way to extract money from the market by making it go away off the top of my head, so I don't imagine it will last long now that it's been reported in public.
The parts about equilibrium models being taken too seriously are well taken, though.
Re: Mandelbrot Beats Economics in Fathoming Markets
#5For a little background on this debate:
http://tuvalu.santafe.edu/~jdf/papers/farmer0606.pdf
Re: Mandelbrot Beats Economics in Fathoming Markets
#6It staggers me that so much prevailing thought still leans towards the idea of complex, highly connected systems as inherently stable, with their natural state as equilibrium. It dates back to the victorians, with their "All things Bright and Beautiful" view of god's creation, which was shattered by darwin. How long it takes us to learn the important lessons. This view was prevalent in the world of ecology for decade…
I agree with your first 2 sentences but I think that Adam Curtis's 'films' should not be watched by anyone. Especially someone trying to think about something like stability and connected systems.
His train of thought narration and brilliant music is just opium for people who aren't concentrating.
Re: Mandelbrot Beats Economics in Fathoming Markets
#7It staggers me that so much prevailing thought still leans towards the idea of complex, highly connected systems as inherently stable, with their natural state as equilibrium. It dates back to the victorians, with their "All things Bright and Beautiful" view of god's creation, which was shattered by darwin. How long it takes us to learn the important lessons. This view was prevalent in the world of ecology for decade…
I agree with your first 2 sentences but I think that Adam Curtis's 'films' should not be watched by anyone. Especially someone trying to think about something like stability and connected systems. His train of thought narration and brilliant music is just opium for people who aren't concentrating.
I think people here are grown-up enough to cope, especially now that we've both warned them.
At the very least people should watch them simply for the treasure trove of historical accounts and strange characters contained within, even if they don't believe a word of the conclusions he draws from them.
Re: Mandelbrot Beats Economics in Fathoming Markets
#8I'm surprised nobody has pointed out that the Euro is a tragedy of the commons.
"Pooling sovereign debt absolves the most irresponsible nations from confronting their unsustainable spending by forcing more responsible nations to pick up the tab. All of the incentives are weighted in favor of irresponsibility and none to responsibility. No pie-in-the-sky plan by the EU to dictate budgets to its members will ever work. The members will either ignore such interference or, as has already happened, cook the books to make it appear that they are doing so." – From Philipp Bagus' The Tragedy of the Euro
Re: Mandelbrot Beats Economics in Fathoming Markets
#9This is a good overview, though as one minor quibble, the critique of "rational agents" is separate from the critique of equilibrium models: even if all economic actors are rational agents, that doesn't imply that everything converges instantly to nice equilibria with an absence of feedback loops, attractors, and the other typical nonlinear-dynamical-system pathologies. In fact most agent simulations in AI that use r…
"Rational agents" in the context of economics does not mean people make the best choices for maximizing capital preservation. It means that human behavior is inherently rational because only an individual knows if his choices were in his best interest.
Re: Mandelbrot Beats Economics in Fathoming Markets
#10I'm always perplexed by the notion of trying to "model" an economy. I don't understand how aggregate statistics about a market reveal any insight into how to create sustainable value. I feel like it's similar to knowing the past winning numbers on a Roulette table, because it provides no actionable insight to future winning numbers.