Computation, finance and engineering

Of course, the American dream is 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?"

Remarks:

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: 09/09/2009