Saturday, September 26, 2009


Moral: Wherein we see that the current mess has generated many opinions which are interesting to read, such as WSJ, Economist, Forbes, and more.


The recent Business Week had several articles that we ought to look at. A couple of these will require further attention.
  • -- Financial Innovation Under Fire covers three views about the needed regulation. Namely, the best-and-brightest need a leash to reign them in prior to bad consequences. The article characterizes as "beneficial ideas" and those that "are self-serving or dangerous" the types. Who knew beforehand? Or were we just to marvel at the creativity? One piece of news is that MIT has a Laboratory for Financial Engineering. Despite that opinions about financial engineering have already been offered, the blogger is willing to entertain the increasing role of computation. We do need what the virtual world offers and will look at this more thoroughly on a regular basis. After all, he spent his working life in advanced computing. Hence, he knows our main task, to prevent the wizards from their self-serving ways.
  • -- In the future after the mess, what will be the consumer footprint? After all, we cannot expect people to live under a regime of increasing debt with no limits in size or extent, meaning, of course, that related to the rights of the progeny. Okay, some, like Fisher, see debt as an asset which it is. For instance, being able to borrow, that is, having a good credit rating, is important. That's not the same as debt on the balance sheet. The issue is that the consumer part of the economic equation is large. Some say 70% since $10 trillion of the $14 trillion of the US GDP is "personal consumption expenditures" according to Bus Week's Michael Mandel (Reconsidering Consumers' Impact On The U.S. Economy - Sep 28, 2009). However, splitting the number so as to isolate "out-of-pocket" spending, then the impact falls to 40%. Still large.
  • -- There was an ad for Fisher's book, Smelling a Rat. He also has a website.This sounds like something that Whose Nose Knows will need to look at.
Note: Opinions range across the board. The new day will have influence on how the discussions unfold into action. Yet, one would think that there is some underlying 'truth' that would come to the fore. Except, where humans are involved, is it ever easy?


10/05/2009 -- Ah, yes, on the behalf of.

Modified: 12/24/2009

Thursday, September 24, 2009


Moral: Where we recognize that these things are not easy, otherwise it would be a piece of cake.


And, we don't even need to bring in undecidability. It's complicated enough by itself.
Note: As mentioned before, several blogs have been offering views which run the gamut. Those at The Baseline Scenario seem particularly apropos to the time. The image at right (See Slide 15) shows better the more detail what was discussed in Remuneration, finance style back in May of this year. The finance industry, much larger than it ought to be, claimed a large portion of wage. Now, some of this might be rent seeking, yet of what practical use of moving money from one pocket to another?


09/26/2009 -- More readings.

Modified: 12/24/2009

Thursday, September 17, 2009

Making money

Moral: Wherein we consider that money has a lot of meaning which we'll be looking at. Of course, there is the economic sense.


One way to make money is to print it or wish it out of the air (extractions can be of several types). However, let's change the subject slightly to talk about making a living (money as bread).

He who orders the printing doesn't make too much, in terms of pay, as one would expect with a government job. Nor do those who actually run the printing pressess as they are of those who toil. Others have flows that are outrageous, such as the head of a major health agency whose income is on the order of 1000s of bucks per minute.

While many today, it was said on the tube, live from paycheck to paycheck. Well, that's not new. As we know, many others are without a paycheck. Some try to make money from financial manipulations.

Is profiting from the financial casino, which some see as making money, really so? What, profit comes about from mere winning in a shell game?

Or, is this thing that has been allowed to develop and to take most of the economic energy just some allowed manipulation of near-zero situations because we don't understand yet how to model the full impacts? Is it that accounting always lags in its political maneuverings? Ah, perhaps, we'll have some type of mathematically based approach someday - albeit, even with undecidability and quasi-empiricism, it would be a step up.

An Atlantic article mentioned the IPO rage that persisted for some time, with some making oodles. Others not. That is profit? Those who had the ka-ching in those deals were the consultants, such as those of the golden sacks.

Then, we have things like someone from another health organization saying, on the tube, that a return of 25% is desired. Mind you, that is after all expenses! Sheesh, where did that notion come from? Even the nun-based seem to have been influenced by the lure of bucks. As we know, many patients don't (or didn't) get the care that they need so that the health provider could profit more. Like the one organization (same as above) where the head went out to the pasture with almost a billion (yes, billion) of bucks.

Huh? And, we can't afford general health care?

Note: We can go back and see the history behind the current state, with the increasing trend toward the vacuous financial state. Sort of going backward, we are now where a very small percentage holds a very large part of the wealth. For the past couple of decades, the middle class essentially has become paupers. Oh, I know, they have goods up the wazoo out there for them to buy and to contend themselves with. Ah yes, all of it quality stuff. On the upper end, we have the ever-increasing houses (way beyond McMansions) and boats (football field in length) and planes (personal flying apartments). And more. Of course, there is the Madoff type (who may be more prevalent than we think) working hard for illegit gains. Also, we had the computer come along of late causing lots of things to change, including the financial game's basis. At some point, let's say early 70s, there was probably some rational link between capitalism as an ideology and the reality as practiced. That has all been lost. The best-and-brightest, who are to be our saviors, have for the most part been lured into greed and egoistic assuages (read that, CEOs). Methinks that Adam Smith is turning over in his grave from all this disarray that has been promulgated under his name. Things, folks, are way off base. Of course, the game continues daily, or, at least, five days a week. Thankfully, there are the two days of the weekend. How long would it take, and under what circumstances, for the realizations of things being awry to take hold and for the steps to get it on a better platform to start? That, folks, is one goal of this blog, to bring this discussion to fore.


09/21/2011 -- On Wealth and the CEO MVP.

05/17/2011 -- Golden sacks (leftmost mug of the rogue table), by Rolling Stone and Daily Ticker.

01/03/2010 -- More news on Goldman Sachs as the uber example of 'not on the behalf' comes to fore regularly. It'll need to be a separate subject at some point. Thanks to McClatchy: Nov 1, 2009 & Jan 3, 2010 (update). Goldman has to respond, of course.

12/01/2009 -- The consumer as focus.

11/08/2009 -- The gigantic chimera needs proper attention.

10/05/2009 -- Ah, yes, on the behalf of.

Modified: 09/21/2011

Monday, September 14, 2009

Engineering economics

Moral: Wherein we look at the engineering of economics. This post's motivation comes from seeing the FT review of Rick Bookstaber's and Nassim Taleb's testimony before the US House of Representatives' Committee on Science & Technology.


As mentioned last post (see Remarks), having recently run into Rick's blog is cause for a pause to catch up, since I have been paying only cursory attention to the use of technology in the markets since other technology was so fascinating.

Like what? Well, technology such as engineering computing that allows complex systems like an airplane to be designed and tested. The modern processes and materials are vastly different from what they were 20 years ago, as are the computers.

From looking at Rick's recent posts on high frequency and algorithmic trading, which go into some technical detail, I can see some of the parallels that I had expected (see Econ/Eng). For one, both have a problem with determining value, albeit it's 'fair' in finance and 'earned' in engineering. There is more than a tenuous link here which I intend to show as this is a problem that has been exacerbated by technology, not helped.

But, what can we do? For one, we can define and put into place an economic sandbox. Ah, what might this thing and why now? That is the work that we have to do.

Perhaps an aside is in order. I may have spent a large part of my career in engineering computing, but my degrees are in Economics with a mathematical focus. During the other times, the focus of my work was operations, and management, research. Hence, I'll have to admit some affinity with those worrying about risk management. Too, I spent a lot of time working issues related to knowledge and computational modeling (KBE).

Both engineering and finance have been a focus in this blog, albeit seeing a lot of fiction in finance (Rick says stranger than fiction). One thing about finance's use of technology is that the game aspect dominates any science for several reasons. Well, engineering companies like to make money to boot. Yet, in engineering, we go up against nature.

Which, by the way, the quants bemoan, that they have to deal with unpredictable humans. Hence my having up close exposure to the underpinnings, and problems, of our house-of-cards led me to look for causes to problems that are, well, cyclical. The trouble is that we don't seem to be learning the right lessons.

For instance, I started a list related to finance earlier this year. Engineering does learn, just witness the marvels all around.

One first lesson might be to accept that striving and gaming will not resolve intractable, essentially undecidable, issues. That applies almost everywhere. In finance, near zero is real, folks.

There will be more posts related to Rick's work.


05/28/2011 -- Lemons problem, dark pools, ... Oh, so much to look at! Avatars, too.

01/19/2011 -- For the most, things are dire, not by necessity.

05/25/2010 -- Who will (or can) lead out of the morass?

11/30/2009 -- From 'Our basis' can grow a whole bunch.

11/29/2009 -- Rick is now with the SEC.

10/05/2009 -- Ah, yes, on the behalf of.

09/21/2009 -- Yahoo Finance talks about the decline in youngsters going into finance. That sector, finance, grew faster than any other for a couple of decades. How useful was that?

Modified: 05/28/2011

Sunday, September 13, 2009

Economic sandbox

Moral: Wherein we consider a sandbox. In several posts (see below list), 'sandbox' has been used to either characterize gaming that is risky (sandboxy) for more than just the players or to denote a better process, using as an analog the role that labs play for the test engineer. That is, filter out the toxic from the secure instruments.


Think of it this way. A new plane is seriously tested before people fly the thing. Even the test pilots don't just jump in and take off. Where is there some correspondence to this notion in economics?

What we've seen is creative spawning of instruments as if by necessity. Then, in the past year, we've seen 'shooting from the hip' by some cowboys (right and left, there have been processes changed and adopted, seemingly without caution); too, those in the position to rake in the dough are doing just that; the taxpayers, and savers, are being sacked.

One motivation: describe and establish a mechanism to put the game players where their impact is limited. We do not need this supposed 'creativity' of the best-and-brightest that seems to persist in creating dire consequences for the majority.

So, for starters, let's look at the posts that used 'sandbox' and start this necessary discussion. The following are three groups of links to post with some comment about how it relates to the sandbox imperative. The post are listed from latest to earliest in time.
  • Roles for schools (Sep 09) -- As mentioned earlier, labs are an accepted fact in institutes of higher learning.
  • Modern finance (Oct 08) -- Where did the notion arise that people could play games with other people's money using what are essentially untested processes? Does fiduciary duty mean anything?
  • Easy steps (Oct 08) -- Definitely derivatives (other usage) ought to be wrapped with some type of testing constraint. Minsky's notion of speculation leading to ponzi applies here.
  • Swarm proof (Sep 08) -- This type of proof, applying the wisdom of the crowd concept, would be interesting in several contexts.
  • The times (Sep 08) -- We need to accept our quasi-empirical limits as we apply some notion of testing. How do we agree on these is something to discuss.
  • Loops and truth (Feb 08) -- Getting an agreement on limits would help us to try to resolve issues related to the thrill of gaming where consequences go far beyond the player's own health and wealth.
  • Cult of me (Jul 09) -- We may already have some sandboxes that are being misused by the 300 lb bullies.
  • New type of colonialism (Sep 08) -- Sandboxes could help reduce the large influxes to some pockets, albeit that some of these come about from making bets that pay off (note, near zero allows us to know that the pay off was from pockets that diminish correspondingly).
  • Oops as poop (Sep 08) -- Not handling moral hazards leads to an increase in sandboxy ways (where the whole economy is seen as someone's sandbox).
  • Oops and more oops (Sep 08) -- We could show that hedging and speculation are natural control mechanisms to some point beyond which the game then is sandboxy and ought to be handled as such.
  • Miscellany (Jul 08) -- The sandbox notion applies to control of risky behavior, except that there has not appeared to be an easy way to resolve the issues. However, has any tried the sandbox? Oh yes! Engineering!
  • People matters (Mar 08) -- This was the first mention of the sandbox needed to control use of methods that have more potential than their current role of moving monies into a few pockets. After all, how people use their monies can be a type of voting. Allowing such a thing to evolve can be thwarted by the massive flows from the giants (un-level field).
Note: these posts paralleled the unfolding of the madness with several reactions, including from incredulity.

Note: 'sandbox' has found usage in computer security and software development. This usage is apropos to the discussion of an economic sandbox.


01/15/2015 -- This week, this post is getting read. Great! Nice little piece of work (kidding, in part) so many years ago. ... At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

12/22/2014 -- Nice to see the WSJ article use "sandboxed" in relation to the absence of "predict or control" within the context of computation (in a sense, we are already out of control). The issues raised in the article are central to truth engineering's core focus.

10/30/2014 -- Where are we?

10/16/2014 -- Need to get back to this, as the days of the downturn loom. No matter how much the Fed feeds the panhandlers, they will succumb to health issues at some point (when?, how long?, actually, for me, it does not matter, as I am an observer, only, who is one of those interested in building a better pie). The tragedy to all of this? Oodles of hapless folk will be drawn down with the players as their ca-pital-sino sinks. ... Does not have to be. There are better ways.

01/20/2013 -- Perhaps, the sandbox ought to be for play, dirty and otherwise. Which means, of course, outside of the mainstreams that handles things for the folks who care about their economic well-being.

09/14/2012 -- Ben just gave them, the runner amok'ers, the store

05/28/2011 -- Lemons problem, dark pools, ... Oh, so much to look at! Avatars, too.

04/03/2011 -- Need to look at some background issues. Sandbox, again.

03/22/2011 -- It's spring, and the garble uses gambling metaphors.

01/27/2011 -- The chimera shines.

05/25/2010 -- Who will (or can) lead out of the morass?

12/24/2009 -- What would Samuelson think of the concept?

11/29/2009 -- Rick is now with the SEC. Who will engineer (verb)?

10/05/2009 -- Ah, yes, on the behalf of.

09/13/2009 -- Need to pause for a bit, to look at Bookstaber's work.

Modified: 01/15/2015

Saturday, September 12, 2009

Educational institutions

Moral: Wherein we move beyond picking on the quants and companies. We have also talked a little about money and the intractable nature of problems. Now, we need to consider schools and their economic influence.


Let's restrict the type, for now, to those institutions of higher learning that offer so much, yet seem out of the loop, to boot, which isn't a bad thing.

We've said that we need a sandbox in order to separate out the gamers from the savers. The latter group gets sacked while the former blaze out their glories. And, the gamers get their gains; we bail out the failures with no provisions for claw back. Oh yes, we could do that with the proper accounting.

So, why can't universities provide the sandboxing? That they are open about their endowments, to some extent, allows us to see gains and losses. That some have bled through the nose this year is something to look at closely. Did those who led toward risk do any payback?

Note: Much more can be said on this subject. In engineering, one sees collaborative work between school labs and business. In fact, it's almost an accepted way of life. What happens in finance that is similar? It's not analogous to export out mathematical quasi-geniuses whose shenanigans put the rest of us in some type of situation where we need to bail them and their fat cat bosses out of trouble. No, we need more than that. Computation has helped screw up the world; schools are a major factor in this unleashing of the beast; they have the duty to help us get things balanced.


10/17/2011 -- If we're to challenge Harvard on its duty, then we'll need to beef this up. For one, is education only operationally important, measured in bucks? Ah, so much to discuss.

05/25/2010 -- Who will (or can) lead out of the morass?

09/12/2009 -- Forgot to mention Economists in the list. As well, sandbox was used without definition. Let's discuss that concept.

Modified: 10/17/2011

Thursday, September 10, 2009

Alan's reign

Moral: Wherein we look at King Alan, as he did reign for many years, probably too many. Everyone seemed to hang off of his words, as they do now with Ben, the saver sacker.


Alan comes up now since he was holding the rein for so long, and he appears to be unapologetic. Except, he did admit that his worldview was shaken (in particular, his belief in banks doing their own self-policing); that was earlier this year. Now, he's back with his message (see Tech Ticker).

So, before any discussion, let's start by reviewing the references that we have made to Alan. We thought of him early on as this mess unfolded.
Well, as Alan is saying, it's true that capitalism's take on the market does allow human characteristics to emerge, some of which may not be desirable. Near zero, when shown, will suggest that there are better ways for us to go.

Note: That finance could be run by those who do not salivate when money is passed beneath their noses is still to be considered. Of course, with the devaluation of the dollar, thanks Ben, we might get to the stage where our beloved buck is only play money in the US. All sorts of things to consider here, with Alan's reign as one factor.


10/21/2013 -- Alan has a book coming out. Ben still slaps savers silly; a new day is coming.

01/27/2012 -- Ben will continue to sack the savers; he must love the ca-pital-sino.

02/01/2011 -- The chimera shines.

11/26/2010 -- On the Greenspan Put (Rolling Stone).

11/02/2010 -- Over a year later, the message is the same, except some changes have occurred. But Big Ben continues in his ways. Of real note is that the jobless rate is high; out-housing really set up for that. Also, we need to re-look at that learned from the 'vons' guys, Ludwig and Friedrich. See Near Zero.

01/06/2010 -- Poor Ben, getting grief and criticism.

01/03/2010 -- More news on Goldman Sachs as the uber example of 'not on the behalf' comes to fore regularly. It'll need to be a separate subject at some point. Thanks to McClatchy: Nov 1, 2009 & Jan 3, 2010 (update). Goldman has to respond, of course.

12/29/2009 -- Time calls Ben an uber-Nerd.

12/28/2009 -- Ben was named the Time Person of the Year. Nice. We can't call him 'King' as we saw with Alan's 'cult of personality' reign.

12/15/2009 -- Requiem for the dollar (WSJ) and responses.

12/09/2009 -- The Street loves Ben who loves 'em back: The Street utterly loves the Fed's largess, earning massive profits from trading unstable currencies, the carry trade (borrow short-term dollars near zero, buy longer-term assets abroad), and the high-margin process of transferring America's capital abroad.

11/20/2009 -- To quote: Abjuration and Recantation. Yet, Alan and Ben, at best, can just spit in the wind, as long as the standard is gab. Our trust? We want to put those inclined to malefaction in a sandbox.

10/06/2009 -- Ah, yes, on the behalf of. It is clear that Alan and Ben act on our behalf, though one has to wonder what 'our' means as it sure is not the little guy. Finance, people, can be (probably ought to be) run as a non-profit affair. AND, the CEO (or whatever the titles at the top) would not make $1M! That is absurd. We have people who put their lives on the line for this country and its ideals for pittance. As said before, we really need a national service (Remarks 09/03/09) experience for the young'uns, especially for those of the privileged classes.

09/15/2009 -- Lessons, one year after Lehman. Also, Time on culprits. Ben is happy-talking, again.

09/10/2009 -- We'll tell this tale further. The trader guy on firstbusinessx says that it's hard for a trader to make money in this market. Yes, indeed. There is a whole industry that rakes off the fat from the labors of others. It's like this, folks, a gallon of milk (the cow did the labor) has only so much fat that is easy to skim off (cream - ah, that's the role of golden sacks). Then, with a little more labor (secondary), fat can be extracted through modern technology. Eventually, the residue is colored water which may even need some boost by added nutrients to be considered food. Well, the economy is a lot like that. We've had a generation or two of the best and brightest go apply their brains to gaming, essentially. Some of this was encouraged by Alan and the FED. That will be part of the analysis. What's left is the watchword; not much of value, under the current scheme of things, is the answer.

Modified: 10/21/2013

Wednesday, September 9, 2009

Why not?

Moral: Wherein we ask 'why not? which question can go a couple of ways. We're going to look at one of these. Actually, there is a third that is the mantra of the toddler learning about its will, that of others, and boundaries (say, good behavior), but we'll not go there either.


The query could indicate an awareness that something ought to be done or to happen, say like realizing one suggestion from the President's speech. Stay in school and be a good student (as good as you can be). Or, why not build a new plane with entirely new processes and material, that is, re-position the decision framework on an unknown center plus relax constraints along about all decision axes? In other words, the little engine that could. Or, why not pursue globalization? That's not the focus, for now.

The query could relate to reasons for something not happening, such as causal analysis tries to effect. Oh yes, risk analysis tries to do this before the fact. That use is what we're going after in order to pull together some 'un' words with a coherent message. For instance, 'undecidability' has be thrown about here, thanks to its use by the Vienna School. And, 'underdetermined' has been used, mainly due to its usefulness in resolving how we think about several dilemmas. We need to add 'unpredictable' as the risk people don't seem to know the concept.

Let's try this sequence of using these concepts (U U U N, unfortunately, not as meaningful as TANSTAAFL) in order to explain why these have appeared as well as to start discussion about what their applicability means to our difficult situations. There are other orders; this one seems to have some power for explication.
  • Unpredictable - Actually, this ought to be used for the fact that we have no a priori knowledge of how events will unfold, for the most part. Of course, some stable events recur without our involvement or worry. For instance, days succeed one another. Yet, how many lost their wealth, and income, of late due to some idiocy (not necessarily their own) that can be explained? Do we know of any problematic programs? Say, has weather forecasting in your area been 100% on (whatever that would mean) this past summer? That the quants have run off after their stochastic taming attempts we'll be looking at further. That CAE folks have broken the rules of map/territory differentiation is another variation of mis-handling of that which this sequence denotes.
  • Underdetermined - Well, what does this mean? We can use the wiki definition. Since predictability, and its complement (ah, is that so?), are figured using mathematics, albeit a subset dealing with things called statistics, let's use that type of story here. Basically, if we have a series of equations and unknowns to be determined, we like them to match in cardinality. That is, if there are too few equations, then we'll have to sort out the extra unknowns by various schemes (assumptions, swags, etc.). If there are too many equations (too few unknowns), then we're on the other side of the bad boat. The case, with computational modeling, is just this. Too much fudging (sorry, techie folks, but the truth has to be told). Also, note that we talked about unknowns. The equations would contain variables, to boot, whose definition and handling can be problematic.
  • Undecidable - Now, we have to mention Turing's, and related, work, briefly. Then, we can just discuss the issues involved with the complicated concept, in general. It is more than just a computation problem, as we see from Hilbert's query. To shorten a potential long story, we can say that some issues are not related to time, sequence, or any type of order. Yet, we can always re-frame things to be decidable, within limits (meaning choice, allowable error, etc.), of course.
  • NP (Nondeterministic polynomial) -- We're using this to introduce complexity. You see, even re-framing does not guarantee some solution unless we're exceptionally good (which some people are) or lucky (again, we see this). Yet, it's the computational aspect that is troublesome, such as using approximation, heuristics, and more. Why? We have had many of years to learn about human dynamics; yet, there continues to be intractable problems. Adding in the computer just exacerbates things incredibly. But, for thinking of complexity in terms of using the computer for solutions take the chess game. Well, that little game, on a small board, is highly complex. Something as seemingly simple as checking if two circuits are equivalent is, to boot.
Having gone through this, can you see other orders? It's the chicken/egg thing. For instance, 'undecidable' might be made the basis, with incompleteness being a key thing. The order, shown in the list, comes about since we're dealing with things that have gone awry due to our immaturity with using computational resources.

One could suggest a decision framework based upon this order that is operationally effective (with a bow of acknowledgment to quasi-empiricism). By the way, with NP at the core, how can we proceed? Ah, that is the essence of truth engineering's contribution.

But, this question of 'why not?' and UUUN ought to be part of the program management vernacular, and jargon. So, we'll continue this next time.

Note: An important concept will be separability. On predictability, some say, well, the sun will rise. Sure. But, weather was added in for this reason: will it be clear enough to see the rise? You see, NASA faces this problem all the time with shuttle launches. So, various windows of opportunity can be identified, with some ranking of certainty. Yet, the operational scheme is to be ready to take advantage; and, how many times does weather cause a mission delay? Now, if the parts of engineering that relate to business would just go back to their true framework, perhaps some of the hubris would diminish. The issues of underdetermination, undecidability and NP are important just because predictability, as a highly mathematicized approach, can be easily mis-used. Too, people play power games in these complex situations where someone who fails to solve an essentially intractable problem has his head removed. Sheesh. How the hell can we expect to learn without failure? Those who try and fail ought to be honored. Except in this situation that is very much apropos for mention and current: playing silly games with other peoples' monies in a risky fashion is verboten, by definition. Because of near-zero, we ought not even honor those who win. Stupid game, folks.


01/15/2015 -- This week, this post is getting read. Great! Nice little piece of work (kidding, in part) so many years ago. ... At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

03/11/2012 -- We need to update this, especially with a nod to Alan M. Turing.

10/07/2010 -- Several principles need to be explored, such as the ergodic one.

12/08/2009 -- Consider current CEOs in relation to Paul. Not fair? Well, these guys/gals have set themselves upon some supposed plane that is above the rest of us.

11/29/2009 -- Rationality and risk. Need a new look.

11/08/2009 -- The gigantic chimera needs proper attention.

10/16/2009 -- 201K <-- 401K --> 25601K, this denotes the current financial gaming.

Modified: 01/15/2015

Tuesday, September 8, 2009

New School

Moral: Wherein having mentioned, several times, the Vienna School (also, known as the Austrian School) which is continental, it stands to reason that we need a link to something on this side of the pond.


So, we'll use the New School's site, though it is mainly a development of an extensive view of "The History of Economic Thought" with links to a whole wealth of material, including commentary. "New School" refers to the university, not another economic school. This site allows a look at the breadth of economic thought.

We see categories, such as the Classical and its Neo follow-on. Plus, there are the alternative views.

One area that we will look at will be the heterodox approaches which were mentioned in a post related to money. The reference, then, alluded to other views, such as thermodynamics as a motivation, and model, rather than just having a gab standard with its star player, the saver sacker. As well, this approach might be better if it were extended with bio-dynamics, too. However, there are other equally valid view to consider.

A lot of the categories are top-down and heavily theoretic. Notice the use of "themes." These we'll look at too, as it's where we can see a focus on game theory or finance, perhaps allowing a bottom-up construction.

Probably, the first reaction to looking at all this thought is that there is not an answer, hence we know economics as dismal. Yet, perhaps, some physically-based model would have more appeal and application than we've seen so far. After all, nature and life have been there a lot longer than have been our analyses and other little intellectual schemes.

Note: We'll also have to address how we see stability in nature, and life, all the while knowing that there is uncertainty, undecidability, unpredictability, and such. The main problem? The computer exacerbates the issues, more so for finance than for engineering. Yet, they both face problems.


03/23/2012 -- Renewal of the idea (and related energies) via Cooper and CiE.

12/15/2009 -- Requiem for the dollar (WSJ) and responses.

Modified: 03/23/2012

Monday, September 7, 2009

Labor Day

Moral: Where we honor this day that the US celebrates our labor which is an important part of the economy. It's wonderful to note, today, that managers are included. That is, if they want to be, the best and brightest that they are. Oh, wait! That concept is reserved for the quants only?


Business Week has an article that we'll look at further, after enjoying the holiday. The title says a lot (How Science Can Create Millions of New Jobs) and refers to old glories, namely innovations from US R&D. Where are those days?

Off shored (Out housed) in the name of something (some say greed). Okay, we're global, now. Yet, who looks out for the populaces (intended to be plural). Not business which is a fat cat game, folks, by definition.

Science and engineering, of many variety, can help balance things. We'll get back to that more thoroughly.

In the meantime, where would we be without labor?

Note: Sometimes it seems that the fat cats (who are always of smaller cardinality) want workers to be like the Roman legionaries who were devoted to Disciplina. Yes, "frugality, sternness, and faithfulness" for the workers while fat cats have the lap of luxury and unmitigated greed. Need we add, that some jobs are actually dangerous to health, limb and life? Oh, worker jobs, that is.


11/16/2010 -- That the American worker was short-changed becomes more apparent everyday.

12/08/2009 -- Consider current CEOs in relation to Paul. Not fair? Well, these guys/gals have set themselves upon some supposed plane that is above the rest of us.

12/01/2009 -- The consumer as focus.

Modified: 11/16/2010

Friday, September 4, 2009

Economics and Medicine

Moral: Wherein we remind ourselves that though finance and engineering are two important aspects of the economy, there are others. For instance, even though we can include science under engineering, it ought to stand on its own. So, we can start with medical science.


The recent Atlantic provided an analysis of the current status of health care. One article by David Goldhill (How American Health Care Killed My Father) looks at the evolution of the past couple of decades. An interesting notion is the emphasis on insurance in which the patient is not treated like a consumer who is spending money and incurring a cost that can be controlled. Not, the whole thing is oriented toward the games of the providers and the bureaucrats. We need to get the patient back into the focal point. Of course, not everyone could be their own advocate in the proposed system, but that it is being discussed is encouraging.

Regina Herzlinger has been arguing for a consumer-driven health-care systems for some time (Who Killed Health Care?) and is referenced in the Atlantic article. The approach that Regina proposes would rely upon evidence based medicine to provide a basis for making decisions, along with a better medical IT situation.

As a reminder, any new approach, especially that related to computing, would be plagued with the same undecidability issues discussed with finance and engineering computing. Yet, it makes sense in that one reason that capitalism works is its bottom-up nature, when we stay away from errant states, such as casino capitalism. The top-down, planning economies have a worse time handling the undecidable issues.

As well, Regina argues for use of the HSA with some subsidies. As described in a scenario by David, we already have paid a lot (see $1.77M example) given the current situation.

Continuing with the medical focus, we can apply some practical use of metaphors. Even though, the Atlantic article, mentioned above, references a study showing how just a simple check list can improve procedure quality and reduce infections, what medicine shows us, though, is that protocol cannot trump the doctor's knowledge and skill. There's a balance that needs to be better understood.

The same is true for the economy. In fact, there are many parallels since people are the main theme. But, the main motivation is not filling pockets. We need applied use of science and data about more than who has succeeded in getting rich.

Of course, having said that, the question of the overarching metaphor for the economy is still open and to be discussed further.


01/03/2010 -- Sometimes, it seems like a bait and switch.

09/09/09 -- We'll need to look at UUUN, as a framework.

Modified: 01/03/2010

Thursday, September 3, 2009

Value, fair or earned

Moral: Wherein we consider value, yes, both fair value and earned value.


These may seem like two different things, however, much of the underlying technological (and mathematical) issues are the same. Hence, they both are NP and have (actually ought) to deal with undecidability. Yet, what we have is greed or hubris pushing us to chase after rainbows. Of course, in terms of greed, some do obtain a status of bulging pockets to the detriment of others.

In terms of hubris, we have projects running after glorified goals without due risk assessment. Of course, in this case, the risk assessors are wrapped in their own limitations.

How did we get here, folks? Have we "collectively become idiots?"

Well, it's true that there are means to tackle intractable problems. In fact, that's the cause for high pay in many cases. People who perform 'miracles' on a regular basis are employed and highly remunerated. Notice, though, that some want to make the playing field (peeks, look aheads, ...) to be in their favor. So, we ought to ask, what types of 'miracles' do we want to pay for? Is a CEO a 'miracle' worker?

Or, is it those who succeed despite not being appreciated? The trouble is, though, that many times people are punished for attempting, and failing, a solution, as if they didn't try hard enough, when the real reason is the hardness of the problem.

Gosh, that is how we learn! Through failure! The smart learn through the failure of others.

So, we need to change the terminology, perhaps, to get these concepts discussed and in general us. Hardness, and undecidable, do not require infinite sets, just very large, and complicated, domains.


01/15/2015 -- This week, this post is getting read. Great! Nice little piece of work (kidding, in part) so many years ago. ... At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

09/21/2011 -- On Wealth and the CEO MVP.

06/26/2011 -- The chimera, as the basis for our decisions, makes value issues to be more problematic, for many reasons. How did this come to be?

11/21/2010 -- Three years ago, it was said: Computational foci raise miraculous need. Still applies.

12/15/2009 -- Requiem for the dollar (WSJ) and responses.

09/09/09 -- We'll need to look at UUUN, as a framework.

09/04/2009 -- It has been decided about Ben, the saver sacker. We still need to discuss the overarching metaphor for the economy. Quants are it!!

Modified: 01/15/2015

Wednesday, September 2, 2009

Computation, finance and engineering

Moral: Wherein we consider the American dream and success which can have many definitions, most of which would include money which then brings in finance. In engineering, it has to do with coming up with new things that will marvel the world.


The ACM Communication editor-in-chief (Moshe Y. Vardi) reminds us (The Financial Meltdown and Computing) that the current state of affairs in the economy has been heavily influenced by computation. That is, we could not have the 'markets' as they are now without computer and network assistance. Where would high-frequency trading be without the resources they are exploiting?

Moshe mentions a series of shocks that we've seen the past 25 years, starting with October, 1987. That black monday was caused, some say, by program trading gone awry. Since then, various control mechanisms have been put into place to limit decline. Why isn't there one on the upside? Of late, especially with the higher speeds and derivative trading, do we know the effects? By the way, that is not rhetorically meant, as we'll dive into the guts as we go along here.

Then, Moshe mentions the LTCM mis-deal. This could be funny except we did not seem to learn from the situation. That Nobel winners were involved is something to look at, in depth (gosh, we need a sandbox for the heavy players). Needless to say, 'moral hazard' was bailed out.

Now, of course, we have the current mess. There are many culprits and factors. And, we have to add quants to the list, those who ignore complexity and ought to know better.

We can use the ACM Communication to look at a couple of the issues related to the theme. Computation is not the only problem, as we have seen malfeasance, ignorance and other bad traits come into play. Yet, there is a lot to learn by applying the metaphors involved.

The Status of the P versus NP Problem (P not equal to NP)

The discussion about this started as a Computer Science problem but now is on the Mathematics prize list. The gist of the concept is that a solution to a problem is easier to check than to find. That is, you can tell if something will work by trying it. Now, if you don't know the something that is needed, how do you find it? Of course, others may have worked out the problem. That is what true pioneers do.

Yet, what if the something doesn't quite work. You see, any change to the situation related to the problem could invalidate the solution that you have plus put you back into facing the hard issues again. Hence, people do not like change; one motivation for small perturbations is the hope that small changes do not make things worse.

These blogs have used undecidable several times as the means to denote not knowing until after the fact whether something can be done. It's the heart of problems with earned value and of many of the harder problems that are part of our daily existence.

The usage of undecidable can be waved off as academic (see reaction to Vienna School), yet, it is more than that. Also, that the quants run off after solutions that gather money solely while arguing that their measure spaces are well-behave enough to ignore these issues only means that they do not care about the wider effects which have some impact on us all.

Many system problems (including the numerically based) are of the same ilk in terms of difficulty. The mere act of bringing in computational support opens up the related can of worms.

-- AI and hive mentality

Ah, as Jaron says, we see humans "bending over backward, sometimes making ourselves significantly stupider, to make an algorithm seem smart." Just like we have seen in the current mess, he says. I ask, is that which the quant focus takes similarly myopic?

As we've said, leveraging is almost a perpetual motion analog (which is something from nothing), and we know how physicists react to such proposals. Why then is it allowed with money? Like the tranche idiocy?

Same, too, the thing called lean has undecidable states. Management handles these issues by scrapping people, whereas one would hope that we could take a more mature approach (to be defined).

So, how will we ever know if we obtain collective intelligence? In making that determination (underdetermination is the operative concept here), would we have "collectively become idiots?"


03/15/2015 -- Finally, getting around to the pending business.

01/15/2015 -- This week, this post is getting read. Great! Nice little piece of work (kidding, in part) so many years ago. ... At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

03/03/2014 -- Acknowledgements, including math pedigree, will be expanded.

12/06/2013 -- If only Ben would put a shot across the bow. He's helped the chimera unfold in unhealthy ways. He could, at least, say a mea culpa.

08/07/2013 -- Over the weekend, Motley Fool had an article that asked how high could the DOW go to which we made comment (post that was precipitated by the article). So, here are a couple of things to discuss, especially since there seems to be some worry of the taper, of late. First. How do we determine the price at which loss is guaranteed? You see, losses like we've see with the two recent swoons (May/June/July, and the one of the past couple of days) are not shared by all sellers. That is, losses that are not paper only, since losing ill-begotten gains is not a real loss. The loss manifests when you sell. So, as a market tumbles down, those who can still make a profit can bail out to a certain point. That is, they can sell before they lose what the put in. Again, ignore ill-begotten gains, please. If we look closely, that price is not as low as we might think. In a sense, equity holdings will lose money. All the talk about the equity markets rising, over time, do not consider the accumulative losses during the period, nor do they look at the side-effects of inflation (and structural changes like we see now where most jobs are essentially glorified indentured slavery). I know, the trick is to use constant dollars; yet, the total picture is not painted. How do we do that? In short, this problem applies to bond markets, too. Second. For anyone to sell there has to be a buyer. But, to buy, there has to be a seller. Prices goes up as buyers try to get in the game. As we saw with FB recently, prices can jump quite a bit (leaping for the stars - usually without a tether). As markets, like  the DOW, go up and up, there has to be some implosion point (as in, the thing collapses due to the unnatural states that accumulate). Let's say that you run out of buyers. Well, that was handled, in the older times, by the specialist who was the buyer of last resort. Guess what? With these modern schemes, we have seen where there was not a buyer (as in, the game runners want it one way: their continual gain - loses go to the public). So, with no buyer of last resort (and, Ben is being just that for bonds), how long can the market just sit there and churn? Now, there are many ways that people might decide to sell. The fall in price, like the going up, will be faster if there are no buyers to catch the thing. How far can we fall? Guess what? Now, they stop the stupid market. Why not let the stupid thing go down to some low number, say what it was in 1990? No, the thing has to ratchet down. Supposedly, that would remove insanity and allow jaw-boning time (by all of the idiotic heads that yap every day) to bolster people's confidence to get back in to the game (which, we know, as ca-pital-sino, is a loser's game). Or some such. ... Now, we could bring in a third (and more) thing related to the churning caused by all of the algos (errant computation) and other crap (greedy worldviews). Stock would increase in value with real accumulation of wealth (whatever that is) over time. However, how can we see such with the dark pools (idiocy) and other murkiness (just the whole thing of perturbing trades that are meant to lure the foolish to their financial death)? Ben, address that, please.

07/30/2013 -- The future: economy and technology.

06/11/2013 -- CDOs and tranching, once again.

05/14/2013 -- Still the most-read article (post). Ought to bring this up to date. Those who play the games are into computation, heavily. Why not? It seems easy; too, they're allowed to fill their pockets. Congress doesn't understand, evidently. Do auditors? Of course, I've not made it explicitly clear what is the problem (will be working on that). So, we're May, 2013. Ben has a 15K DOW as an accomplishment (congratulations are in order). And, he has not unwound, though we've asked for this for years now. Guess what? We're back to the heavy leveraging idiocy.

10/13/2012 -- Homo heuristicus.

03/23/2012 -- Renewal of the idea (and related energies) via Cooper and CiE.

03/15/2012 -- Okay, might have used incomputability (see post on Alan M. Turing) but stand by the context, the issues, and the need for resolutions. Wake up, quants (you, too, Ben).

09/20/2011 -- This will be used in our constructive effort.

04/03/2011 -- Tis tranche and trash.

02/26/2011 -- Technology will be important. But, for the benefit of people.

01/19/2011 -- For the most, things are dire, not by necessity.

12/15/2009 -- Requiem for the dollar (WSJ) and responses.

11/30/2009 -- From 'Our basis' can grow a whole bunch.

09/09/09 -- We'll need to look at UUUN, as a framework.

09/03/2009 -- Jaron asks: How far back in history toward the stone age will people have to devolve in order to find a way to make a living when fabricating robots are that good? Will people be forced by the market-place to work the fields, as academics did under various Maoist-type regimes? Well, hard, manual work can be good for the soul. Actually, some of the imbalances that we see from abstractionism and gamism would diminish if we had requirements, such as mandatory civil service, of the hands-on kind. that expanded experience.

By the way, it turns out that determining value, either fair or earned, is NP which leads to essentially undecidable states.

Modified: 03/15/2015

Tuesday, September 1, 2009

Spitting into the wind

Moral: Wherein we consider, as Kevin reminds us (What Scares Google), one doesn't mess around when the odds are against one.


Some have made a career in testing the wind in order rake in money, yet we know that near zero is the reality when we look at the whole picture. So, the glory goes to the risky; yet, most actions of these types hurt others more than themselves.

Which brings us to value investing (same issue of the Atlantic). Buffett made oodles using value investing. Megan tells us of talks with Buffett followers who bemoan that the downturn may lead them to leveraging (the source of fictitious, and casino-fied, capitalism), almost by necessity.

She writes, "Value investors deride the efficient-market hypothesis, but they can't deny that stock-screening tools and analytics have taken away many of the best bargains." This brings up the question, could Buffett do it again if he were starting now?

That the horde has gone toward gaming tells us a lot. Too, though, all around are indications that people try to make the playing-field unlevel in order to get an advantage. Of course, some argue that that will always be the case.

Makes one think that the gaming ought to be isolated to some well-defined sandboxes so that effects are isolated. Then, those with more mature aspirations can build something sustainable.

Ah, how to get this discussion beyond such platitudes? Well, science and engineering, folks. And, it'll be more than what the dismal type has given us so far.

So, look at it this way. Minsky talks about the inevitability of speculation; it's a form of instability. Too, we see, almost always, that analogs of 'cooking the books' have been disguised as 'best business' practices.

As asked before, how does high-frequency trading help the commonweal? Actually, it could be an instrument of stability, with the proper measure; guess what, it would be near zero , to boot, if done right (yes, even if golden sacks doesn't see this).

So, to not play the games and to look for value, is that spitting into the wind?

A corollary: working in fields with real effects, meaning other than finance and its ilk, goes with, and not against, the grain (or, continuing with the theme, with the wind).


05/17/2011 -- Golden sacks (leftmost mug of the rogue table), by Rolling Stone and Daily Ticker.

03/16/2011 -- On the rise of the professional politician (will there ever be the citizen polico? that is, those who do not salivate when a buck is passed beneath the nose) toward robber barony. The M & Ms are apropos. As well, need to bring in Schervish's viewpoint.

01/06/2010 -- Poor Ben, getting grief and criticism.

01/03/2010 -- More news on Goldman Sachs as the uber example of 'not on the behalf' comes to fore regularly. It'll need to be a separate subject at some point. Thanks to McClatchy: Nov 1, 2009 & Jan 3, 2010 (update). Goldman has to respond, of course.

09/09/2009 -- To look at some issues addressed here, we'll need to consider Alan's reign.

09/02/2009 -- Several discussions have continued on issues for which this blog has an interest. And, computation is central to some of the problems and has changed the game. So, being rich now is not necessarily a permanent state. Nor is success ever guaranteed, except in fairy dusting and happy talk worlds.

Modified: 05/17/2011