Why is finance so complex? (2011)

> Allows you to get a mortgage

Wonder if that was always so? Didn't people manage somehow to have a house without something which name suggests it will be paid for the whole life?

> Allows you to protect yourself with health/car/life/home/title/etc insurance

A casino, right? On average you lose, but for a price you buy a hedge against unforeseen? At least unforeseen for you?

> Pays for your highways/stadiums/schools and other public works

I thought my taxes pay for that :) . Do you mean "finances" as "machinery which helps moving money"? I think there are several definitions there.

> Protects your deposits

That's great and helpful

> Pays for your retirement

Nah, that's those same deposits. I largely pay myself for retirement, by saving the whole life. There is also an element of "societal insurance", when I pay a little extra to help myself in case I suddenly become disabled. Or dead. Or, well, not so little; that depends.

> Funds the college fund that paid for your school

Again, it's either another example of "moving money", or an oddity - as people managed to get educated even without banks.

> ... Or the student loans that allowed you to attend school

Same thing.

> Supports the global supply chain that brings you your iPhone, stocks the grocery store/your favorite restaurants with food, and puts the clothes on your back.

Yes, that's another important role - bringing together lenders and borrowers, for a fee. One ought to assume the fee in the computerized XXI century should be small?

> Funds the growth of corporations large and small, giving you the job that allows you to buy an iPhone

Same thing. Banks don't "fund" - they "serve". Money aren't theirs, but theirs', banks', depositors.

> Funds the massive philanthropy expenditures that help those in need everyday

Talked about that already.

> Pays the pensions of the elderly

We already talked about that.

So, to boil down - banks provide money-related services, like "guarding" deposits (you pay for the privilege) or "investing" deposit money (you ought to share risks and benefits). Other than that...

Like a software system, it's extremely naive to think that complexity is a sign that a system is rotten.

Why would such an assumption be naive?

It doesn't seem naive to me at all. I was reading a 1994 paper that I posted recently called "A Uniform Name Service for Spring's UNIX Environment" which made me think how simplified a modern Unix could be if it adopted the name service primacy described therein from its onset.

It is just as naive to assume that all complexity is intrinsic and not incidental or the result of inadequate abstractions.

Human behavior is a large part of the complexity because we try to use things like game theory to predict how someone will act based on a confined set of conditions which totally ignore the very long game which has been playing from long in the past and will continue long in the future. There are too many factors to account for which can make an actor appear irrational given the posited conditions, however the truth is there can never be a rational actor until we map every input and interaction in someones life. This is why the idea of a rational actor is horseshit.

Nick Szabo did a recent post that covers this:

A small-game fallacy occurs when game theorists, economists, or others trying to apply game-theoretic or microeconomic techniques to real-world problems, posit a simple, and thus cognizable, interaction, under a very limited and precise set of rules, whereas real-world analogous situations take place within longer-term and vastly more complicated games with many more players: "the games of life".

http://unenumerated.blogspot.com.au/2015/05/small-game-falla...

Plus regarding "funding" education etc they do no such thing, this is funded by the state. The post you reply to is littered with incorrect statements. Well done for calling some out.