Monday, November 30, 2009

Our basis

Moral: Wherein, we see that humans can differ quite a bit as we can observe by looking at the wide variety of human opinions. There are many explanations possible.


Yet, at the basis for human endeavors, such as that which economics claims as its domain, there is consciousness that has defied any definition via scientific means. Oh yes, there are plenty of theories and wishes. The fact is, folks, that the issue is open and will remain so (t-issue). We can gather the facts as we see them, within our neuropeptidergic limitations and attempt understanding. Too, the operationalistic methods can say 'who cares?' and proceed almost nonchalantly. From this, we get workable methods, many times, of which none ever achieves the silver bullet status (not for very long, that is, and why this need?).

So, we can't have some nice theory about rational agents when the underlying basis is unknown (essentially underdetermined, let's say). That is, any constructionist's model ought to have some sound basis, unless incompleteness is accepted as the reality.

That is one reason why the law comes into play so strongly as mathematics has no hold on the overall perspective. Oh yes, again, we see phenomenal advances, yet do not many of these produce more negative side-effects than benefits? That is the reality behind near-zero, in a sense. We have never had a true accounting.

The clever, and we ought to give them some credit for this (tongue-in-cheek, folks - ah, is this risk management or tranching?), have excelled at keeping themselves from having to endure the consequences related to bad side-effects. Think about it. For example, all sorts of modern methods (lean, etc.) can push problems out to sub-contractors (be it by globalization, in some cases, or otherwise).

What are we to do? Well, it does turn out that the computational can be a tool for intelligence and coherency, if we use it correctly. In terms of the context of this blog, 'correctly' would entail all sorts of things, some of which the financiers, and the best-and-brightest, may find antithetical to their interests.

These themes will continue.

Aside 1: As a reminder, there are three blogs using a different viewpoint. Some issues, such as this one, seem to relate across these viewpoints. Hence, look for more material on truth engineering and 7oops7, as the discussion continues.

Aside 2: One thing that will come to fore is that the advance of abstraction in the recent centuries has had both a good and a bad side. We can use the world/earth dual for a brief explanation. Expect that this topic will be more thoroughly covered as we go along here. So, we know that the earth is round (the sphere is a close approximation, yet precise measurement will detail lopsidedness) in this day and age when the Space Station runs around the earth on a fairly short cycle, comparatively. But, too, we know that the world is flat, essentially is it so when one overlays reality with insights from Hilbert (yes, analog of the Hilbert space). Though, since Da Vinci, we've known about perspective and vanishing lines, within the measure on any person, or personal interactions, we have a very large, and orthogonal space. Even relativity didn't get rid of xyz and time. Wait, what gives here? There are many abstractions that we can superposition over ourselves and our lives. Yet, these are all limiting constructs to what 'being' actually is.

Aside 3: And, folks, what has more being than money? Ah, not so, many will argue. Just conjecture a realm in which money does have more substance than we've thought about (yes, economists limit us), and this realm is only partly computationally supported. Mostly, it's that thing that Ben, and buddies, are trying to inflate. Keynes' notion of animal 'spirits' does not go far enough. So, that realm will be described further.


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

02/27/2012 -- This post was a continuation of Our Basis, concerning just how shaky is our perceptual being (from certain views).The 01/01/2012 Remarks (below) points to work by an Eastern European. A recent Atlantic article looks at protozoan influences that may need more of our attention. It's significant that the underlying work was done by a lonely scientist in an Eastern European situation. Western culture has much thanks to offer that part of Europe who bore the brunt of waves of onslaught through the past 1000 years.

01/01/2012 -- Recently ran across the work of Kazimierz Dabrowski. We need to pay more attention to his theory on development. Yes, CEOs (and other takers) as immature (seriously, so). 

08/03/2011 -- The relationship to economics is important.

04/03/2011 -- Need to look at some background.

10/28/2010 -- Warning, train wreck ahead. What train, I had asked? Yes, there is already a wreck, despite the inflated market (those who lost big are still behind).

01/22/2010 -- We need to balance an awareness of the soup that controls synaptic activity with the fact of the wiring aspect. The use of 'neuropeptidergic' mostly reminds those who may have perfect wiring (or think that they do) that their cognitive function is more than can be be modeled by electrical circuitry.

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

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.

12/08/2009 -- 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: 03/23/2012

Sunday, November 29, 2009

Risk and rationality

Moral: Wherein these two concepts play heavily in economics, and finance, in several ways. So, they are worthy of some attention.


First, let's look at a couple of recent media offerings. On the print side, today, McClatchy Newspapers provided some words about how gambling laws might help dampen the effects of the games related to derivatives. Earlier, on the tele, I glimpsed an ad for an investing class where the theme was a clever take on the differences in risk taking, that was observed, between male and female students. Now, this latter has been discussed in several forums, but Laura's take is worth a read.

So, we are reminded that 'casino capitalism' has been allowed to become the basis for the economy, for reasons that we'll be looking at in depth. Too, those who may see that near-zero is the reality are pushed aside for several reasons, of which gender is only one.

Both of these topics are extremely important to our future, risk and rationality. About 'risk' we can say a lot, especially that it is inherent in life, to wit, the monies paid by the big boys to manage it. That the idea has been pushed to the limits of rationality needs some discussion.

Somehow, we hear this inane spiel about the rewards going to those who take the risk. Ah, yes (gains go to the pocket; failures are bailed out and mitigated). That nonsense goes back to the argument that getting out of bed is risky. Well, staying in bed is risky, too. Risk, in this sense, ought not be the focus as risk always is there. Okay, perhaps, some notion about managing risk's effects is appropriate, yet, a real accounting of the types of pain is what needs our attention. It has never been done right.

Oh, things are great? Millions are out of work and without any meaningful life? The fat cats bask in their bonuses, even thinking that these are appropriate? And, those working buy junk from China, assuming that they have money? Extremest luxury for the smallest few is accountable as progress in what sense? (a small sampling of thousands of possible questions, by the way)

Economics, in the classical sense, stressed 'rationality' from its beginning. Well, we can, and will, go into the etiology of that notion. For now, just be aware that economics getting biological (to wit, neuroeconomics) portends that some fundamental changes are coming. Too, we are only at the start of the computational influence. There is a whole lot we'll learn, even to the point of getting an appreciation for innumeracy (is not idiocy!).

When one considers ourselves, what is a rational view founded upon? That is, do we really know which neurotransmitter mix is optimal? Is that why we stress the mental IQ and associated performance (hey, isn't that what's behind the best-and-brightest labeling?) measures?

Or, is rationality tied to mathematical prowess (some economists seem to think so)? Well, can that be done on other than a quasi-empirical basis (think borgs)? Oh, are mathematics and its ilk (er, practitioners) any less subject to influences of the neuropeptidergic nature of ourselves than the rest of humanity (think mole hills)?

Well, to be fair, the argument is usually couched in terms of rational self-interest. However, underdetermined-ness is an important concept to consider in this context that is not easily tossed aside.

So much to discuss.


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.

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

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

02/10/2010 -- We could probably use the auto (and recent events) as a way to characterize the concepts of the blog. Of course, we have the value versus quality mis-think as part of the problem. Business Week reports that Toyota was asking suppliers for a 10% cut. Well, such scrimping would have an effect, even if it was only in looks. However, cutting into the life of a system may appear smart but, actually, relies on the same unstable basis as does a lot of economic thinking.

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

11/30/2009 -- Neuropeptidergic limitations are only one consideration for our basis.

Modified: 12/06/2013

Friday, November 27, 2009


Moral: Wherein this group has not been mentioned specifically, yet. So far, we've had posts about Labor, Economists, Quants (these work for the Financiers), Educators, Bankers (who can be confused for Financiers), and Investors.


Perhaps, it is time. We can start, slowly, with a look at related subjects, such as TARP, and then go into other matters. This topic will be more thoroughly covered, as time progresses.
  • See The Baseline Scenario on testimony given to Congress, lately, about TARP. Notice, in particular, the reference to the April, 2009 article in The Atlantic. What is ironic is that some actions being pursued in the US would be frowned upon by the IMF (et al) if it were the action of a developing country.
  • See Wall Street vs America (the Municipal Squeeze) in Business Week (11/30/09). Example. The issue cover had a rampaging bull running amok amongst the people. Their lesson, the Streeters, could be this: you guys aren't any different than the rest of us, except for some type of conscience disadvantage-ment. Somehow, filthy lucre smells wonderfully under your noses.
  • Bookstaber is going with the SEC. Great! Let's get them money guys/gals in line. Or, can we? Rick was a participant but learned an unusual lesson (see prior bullet). He, at least, knows the issues related to computing.
  • Why do these people think that their manipulations (supposedly innovative) help us? (yes, how have the physicist's (quants) helped these bozos?)
  • Roubini on the coming unwinding. The doctor of doom says it right about Fred/Fan.
  • Is this time different? Well, when will we put these players into their own sandbox to isolate their shenanigans from those of us who are more rational?
  • How do economists figure into the mess?
  • How markets fail. Like the concept of 'reality' economics; versus spitting in the wind.
  • Do morals matter? Ah, way so, even beyond concerns relating to homo economicus.
The list is shortened, but the topic will recur.


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.

12/10/2009 -- More roles include the consumer and the economy.

11/29/2009 -- Risk and rationality.

Modified: 12/06/2013

Monday, November 23, 2009


Moral: Wherein the radio voice said this am, as I was driving to a meeting, says that the market values were up since investors were happy about the housing sales numbers. Well, who are these investors?


We keep hearing bearish opinions about the current state of the market and expect things to go down, at some point. Jumping on the train now will mean taking a certain bath; or a rational view may say that this decline is inevitable due to the nature of the markets now.

Investors? We could look at Wiki's definition which is nice. It does not include speculators, explicitly. Why bring up speculation? Well, Minsky's insights, for one thing. One cannot seem to have investments without the gaming aspect coming to play (casino capitalism).

Well, we know that these investors aren't the little mom and pop types. So, what gives?

Also, we know that there are efforts to put constraints on some of the worse enablers, namely OTC trades. To get some idea of the froth from speculation, Gensler estimated that a "$50 tank of gasoline can support $750 to $1,000 in derivatives contracts."

Ah, is this investment?


Well, today, the following day, the DOW bounced down then up and then down. Ah, so we have profit takers? Those are the epitome of investors?

One thing to note is that some investor types are really programs. Oh, I know, people are behind the programs, yet computation seems to take on a life of its own. Or, it will do so as time goes along; that is inevitable. And, on some days, there is a big push in volume right before the markets close.

Is that evidence of some move by program? So many questions. How can we build an economy on such gaming?


And, we're to the pre-holiday mindset. Tech Ticker has an interesting review of how we compare to a year ago.

So much to read, including a never-ending list of blogs.


12/10/2009 -- More roles include the consumer and the economy.

11/27/2009 - Roubini on the coming unwinding.

Modified: 12/19/2009

Friday, November 20, 2009

Econ blogs

Moral: Wherein earlier mentions (Miscellany) are extended further.


With something as important to our general welfare, and as non-simple, as economics, blogging may perform several roles, such as bulletin board, discussion center, library, and much more.

Of course, we mustn't forget Wikipedia's potential for supporting a live economic framework, in spite of the dismal nature of the subject.

The following is a list of blogs that will be updated regularly.

Related viewpoints.
Regular columns.

07/30/2013 -- See econfuture| Future Economics and Technology.

03/04/2010 -- Added in columns which appear regularly.

Modified: 07/30/2013

Monday, November 9, 2009

The big chimera

Moral: Wherein we need a series that can be done as an independent, and honest, assessment of the practices, based upon the usual market ideology, that we can observe without any inside information and that we can analyze because they use modern, computationally-supported frameworks that have had applicability in all the modern advances including the marvels behind ubiquitous computing and other major engineering systems.


As mentioned before, recent review of the changes that have occurred these past couple of decades shows mind-boggling improvements, yet many of the supposed advances that have been implemented, albeit there were probably many more hair-brained notions never put into place, were suspect, as recent un-foldings of the whole financial scenario have shown. We're in a situation where no one knows what is good and what might be bad in all these schemes just as we do not know how many, and of what possible pain, are the toxic assets that have been shoved under the table. Things froze because those who do the playing know just how suspect are their practices; we, the taxpayers, had to bail them out in order for the game of musical chairs to begin again.

That the FED threw oodles of money at the problem to loosen liquidity has only made the problem worse, and it is more than just an issue of moral hazards.

Of course, some financial schemes stunk to high heaven (Madoff gave us new definitions). Yet, there is no axiomatic basis from which to found a proper view on either side, even though finance did lure many trained engineers and scientists into the game that has been coined as casino capitalism. Methods, of a quasi-empirical nature, can be established and, in fact, are essential to the health and safety of our economy.

That we have time to explore these options must be emphasized, as no train of any substance has left the station. We need to take the time to get this right.


We can proceed in discussing markets as the train the drives things. Or, so one ideology might go. The trouble is that we think of concrete things being sold when we think of the market. At one time, a share had some definition and value. But it is not true now that anything real is processed in the financial markets, for the most part. Just like the gab standard founds our money, these markets mainly push ephemeral entities whose value is a matter of resolving issues related to highly abstracted models and the interpretations of associated rules that are legal, operational, and strategic. And, all this is done under layers of algorithmic mishmash.

What has evolved in the markets is a chimera supported by high-speed computing and algorithms whose potential impact no one has a real handle on. Oh, of course, some are filling their pockets, but the game is near-zero (in fact, it has been nothing but negative for the US taxpayers). Trouble is, as well, that those with numeracy skills have the roles in keeping this chimera going. For some reasons, we don't have any notion of fiduciary duty or of ethics.

Given the fact of innumeracy (which is not idiocy, by the way), the whole population is not served by the methods that have evolved. No way. In fact, the whole claim of best-and-brightest is a form of hubris, suggesting that what we have now is incredibly fantastic.

No, it is not. Rather, it's a house of cards of the most flimsy manner that has been pushed upon the unsuspecting public through the failings of several, especially lawmakers who ought to know better. Proper analysis will show that the markets need to be dampened which action will have several looks.

That some are making money in the current scheme, actually many, yet it's only a small subset, may suggest that things are fine. Well, it is not; the extreme imbalances between Wall and Main Streets, about which there is much clamor, is real, folks. And, it has been greatly exacerbated by computational advances of the past couple of decades.

Since it's rather complicated, we'll amber about while trying to keep some coherence. We can use two players to juxtapose a balance. The first would be Goldman Sachs whose recent overview (of the market structure, pdf) needs to be discussed. Actually, it is nice that they were so open with itemizing the important financial concepts and in explaining their side.

We need to look at ECN, dark pools, alternative trading systems, and much more. As an aside, the definition of the dark pool raised flags immediately as being a means to thwart natural market purposes. We'll have to look at the history of this thing.

The second player will be BATS Trading of Lenexa, KS. Why? They are relatively new and are not located near any other of the major players. Also, they offer an alternative system that has been successfully applied by traders. BATS has their own index which will be interesting to watch in comparison to those updated every day in the media (DOW, et al).

We'll have an old firm and a new one. The latter can serve as an example of what an open economy allows, that is, new entities to enter with a new game plan.

The intent is not to be anti-market. Rather, that which is called casino capitalism must be deconstructed so that we can allow a better approach to the 'market' and its majesty. These things, by the way, ought to be run in a non-profit mode (ideally, by monks who took the vow of poverty - some of those have a lot of numeracy).

Note: This is an introduction. Next up will be the start of the analysis and discussion. However, some thought will need to be put to (this view of, pdf) liquidity. Here's the deal. Okay, using the metaphor of blood, we do want flow. Yet, there are other phases (gas, solid, ...). Besides, the blood carries things, such as nutrients, defense cells, etc. There is something amiss, as what we're seeing is large outflows to bonuses and to supporting lifestyles that are far removed from any ever seen by Main Street. Hang on, as we're going to look from the basis forward. Whose basis? Good question. But, consider this. Cash flow, real liquidity, is only one concern of management. Some type of imbalance has been allowed to come forward where money churning (and froth) is seen as of real value. 'Why?' and 'how?' are the questions. That 'liquid' state, desired by finance, seems to not have any natural analog (remember, we cannot get perpetual motion).


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

12/15/2012 -- Coase, on the subject.

10/05/2012 -- Yes, yes, chimera it is.

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

04/03/2011 -- Need to look at some background. Too, tranche and trask.

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.

10/28/2010 -- Warning, train wreck ahead. What train, I had asked? Yes, there is already a wreck, despite the inflated market (those who lost big are still behind).

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

05/07/2010 -- Out of control, essentially, and not healthy for the backbone.

01/07/2010 -- We need to look at capitalism, closely.

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.

11/29/2009 -- Risk and rationality. As well, we'll need to go further into innumeracy.

11/27/2009 - Roubini on the coming unwinding.

11/20/2009 -- Societe Generale is getting negative?

11/10/2009 -- Glass-Steagall, again. Why not? Also, more on the gab standard.

11/10/2009 -- A floor guy (Chicago) reported on firstbusinessx today that GS was a big buyer yesterday. Was this on the behalf of? Or, is it to keep the boosting going? This type of buying, no doubt, has a floor to staunch any bleeding if things move downward which they are expected to do.

11/09/2009 - Forgot to mention securitization, which definitely requires computational support in its current form, as something to look at closely. It is more problematic than many think, and actually is more of an example of flim-flam than most. So, expect in depth analysis. Ah, structured finance, the bane of our existence, it seems.

Modified: 03/15/2015

Saturday, November 7, 2009

What? A train!

Moral: Wherein it can be supposed that there is a train. Actually, we can say there are many trains.


The problem? That, which those who tout that the train is leaving the station, is a train to nowhere, for most.

To follow further on the metaphor, as the train adds cars for those clambering aboard, dynamics work so that the value from the pockets of those in the rear cars moves up toward the front. We'll discuss how. Then, at some point, the front cars (fat-cats-ville) are kept while a whole slew of cars full of the valueless (supposed, as they've been sucked dry) is cut loose.

Now, given that we know that there is a train, actually many, we can start to define them. Meanwhile, we can also relax in the knowledge that no train, worth our attention, has left (or is going to leave) the station.

It would be better if we could get the sandbox defined and established. That would isolate the gamers from those who want to prepare for the future in a rational fashion. It would also allow means to not sack the savers.


03/05/2013 -- Ben reigns, but the savers' faces are bruised from his slapping.

05/07/2010 -- Out of control, essentially, and not healthy for the backbone.

11/27/2009 - Roubini on the coming unwinding.

11/20/2009 -- Societe Generale is getting negative?

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

Modified: 03/05/2013

Friday, November 6, 2009

The markets II - There ain't no such train

Moral: Wherein we have to say that there ain't no such a train, folks, just like there's no free lunch (TANSTAAFL); all this clambering otherwise is from those who stand to gain from picking our pockets if we board their train to nowhere.


Earlier, we had a brief introduction here to market ideology and its realization in casino capitalism. As we saw, there were many uses for a market, one of which is establishing value. Except, didn't we see this year the bankers, and others, arguing with the law makers to get a relaxation of marking to market? Ah, markets as the ultimate thing to manipulate seems to be the idea for these people.

Now, that we're at some type of crossroads, again, due to all the support after the failure from people like Big Ben, and more, it may be time to start a little review of the past year. This will be brief and continuing.
  • The Liar's Poker author weighed in on the problem last year (11/11/2008). He telling the tales of those, like the culprits. Last year, who knew that the low would be seen in March to be followed by a bear, and perhaps sucker, rally. Granted some have made money (see next bullet), however the issues of near zero (actually less than zero for the most) remain to be look at in detail.
  • So, some have made money in the market this year (see GS, for example). Many may be beginning to wonder if a train might be leaving (has already left) the station and if they ought to board (or have been left behind to forever rue the loss). Suckers beware is the topic of a Tech Ticker talk now that everyone wonders what to do. The message ought to be that we don't need this type of marketeer meddling (actually, racketeering), folks. We actually never did; it's a clever means for those who can to suck the essence from the pockets of us all.
  • Now, given the wisdom of crowds, how can all this baloney keep recurring, folks? Oh, wait, hasn't the Fed, et al, made money easily available for bailout purposes for decades? That finance (heart) has to pump money (blood) is a given, but we have a body that is just covered with leeches.
Why use the train as the metaphor? Well, it has been used in the news, so expect that we'll continue to use it.

Also, what has not been explained is that, in some cases, one person's gain is another person's loss. And, in some cases, for the gain of one, many lose. There are difficult issues to address.


03/05/2013 -- Ben reigns, but the savers' faces are bruised from his slapping.

02/01/2011 -- The chimera shines.

10/28/2010 -- Warning, train wreck ahead. What train, I had asked? Yes, there is already a wreck, despite the inflated market (those who lost big are still behind).

10/25/2010 -- Capitalism, as known now, requires an endless supply of suckers.

03/20/2010 -- The basic problem of capitalism is that the Made-offs are its chief representative.

11/20/2009 -- Societe Generale is getting negative?

11/07/2009 -- Actually, there is a train, or, at least, we can use the train metaphor to discuss the economy's purpose and how finance has evolved into a problem (in medical parlance, not unlike a cancer) within that purpose. Bankers are too used to their funny money world (see Remarks). Ben, wake up!

Modified: 03/05/2013