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.

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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.

Remarks:

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

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?

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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.

Remarks:

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

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.

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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.

Remarks:

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

Value, fair or earned

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

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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.

Remarks:

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

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.

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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:

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.

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.

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

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.

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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).

Remarks:

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

Quants ignore complexity

Moral: Wherein we note that the title may not be strictly true, but we could rephrase as follows. Quants find interesting solutions to money seeking problems, in doing so they skirt the boundaries of undecidable regions, and, then, they tell an improper tale.

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Starting from the rear, the successes, when if looked at closely would probably be a small subset of tried approaches (we have Merton as source for such a criticism). And, given the reality, that the solution was 'magical', is not told since the fat cat paying the quant doesn't want to hear such.

Continuing to step back, the undecidable argument comes out of studying Vienna school thinking about the economy. We, on the western edge of the big pond, like to continue our 'manifest destiny' ways in the realms of the virtual and digital. Ah, only if it were to be. On the eastern side, their longer history leads to some insight about how easily we can be misled by statistical mechanics and, especially, game theory as it may be exploited via better handling of differential equations (namely, the partial types).

Look, folks, near zero is real.

The use of undecidable here is fairly broad (to be discussed, including the specific use within mathematics of independence).

Now, for the first point, that fat cat approaches to money making would include computational advances, and flim-flaming mathematics, is to be expected; exploit all avenues to maximize pocket size structure and fill. Yet, they need to be called for this. Why else do the hedge funds want rules that allow them to cloak what the hell that they do? If they were so smart, they would show what their shorts cover with the knowledge that no one else could figure it out.

Too, we see high-frequency trading leading to very smelly tactics; ah, intellectual cesspooling that it is.

That Madoff got away with his shenanigans for so long is directly related to his computational authority (access, support, etc.) and his ability to keep away proper scrutiny.

We'll look at this type of thing further.

Remarks:

10/24/2012 -- Goldman skimming via Quants and their creative finance.

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).

05/25/2011 -- Are lemons the norm in finance?

05/17/2011 -- Hedge funds need some of our attention.

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

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

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

02/10/2010 -- Recent auto events have a similar basis, folks, to the mismash out of 'quant' thinking.

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

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

09/02/2009 -- Let's put undecidability on the table, please.

09/01/2009 -- Not just picking on Quants here, as we see product and process people making similar errors. Though, it's hard to talk error when money is rolling in the door.

Modified: 10/24/2012