Rather than studying ethical behavior in a moral contexts we should be less naïve about the role of people in these systems. Perhaps behavioral economics is more on-topic in that sense. I see native trust in markets as a form of intelligent design. I see prediction (as in portfolio evaluation) as more art than science – it’s like playing poker to see what price you can get.
I would appreciate any pointers to background material for these presentations. I’m particularly interested in any attempt to shift from predictive models in a Malthusian mold (claiming to know the future by projecting from the present) to a framework building on what I consider the essence of evolutionary processes – the ability to capture success and survive failure without having to be predictive beyond very modest contexts. (Too bad we use phrases like “survival of the fittest” which confuses a mechanism with the dynamic that drives evolution).
The reason why I put so much emphasis on evolution is that we have a system that survives (and thrives) despite the essential unknowabilty of future interactions and the absence of a single goal or optima. Thus I consider efforts to develop sophisticated quantitative models and tools to be the wrong framing. The primary “given” should be that the future is unknowable – if we try too hard to predict the future we’ll find ourselves in the Malthusian trap that Forester’s System Dynamics did with the Club of Rome reports in the 70’s.
I bought a book, The Limits of Market Organization, hoping that it would move beyond uniformism and look at the characteristics of particular markets but instead I found the chapters on The Internet and Telecom hopeless mired in false premises in treating telecom as a railroad and the Internet as just another telecom service. It’s a classic example of trying too hard to predict the future while naively misinterpreting the present – a present that is inherently ambiguous.
It may be unfair to characterize economists as being too willing to accept premises so they could then write papers. This is why I’m interested in counter-examples.
I’ve been arguing that we need an economic/financial system that creates opportunities for many small efforts rather than large all-or-nothing projects. Or, to use evolutionary framing – we need many ecological niches as units of failure. A corporation can be such a unit if but we try too darn hard to keep them alive instead of treating failure as a learning experience.
The question is whether the concept of “economics” is the right framing and whether we should leave evolution to the biologists. We do have “disciplines” (an ironic term in this case) such financial management which does calculations within a framework and should treat valuations as tentative and context-dependent. Unfortunately the naïve (as well as willful) hubris leads the practitioners to act with unjustified certainty. (Robert Laughlin’s A Different Universe tells about the limits of piling models upon models).
From: David Farber [mailto:dave@farber.net]
Sent: Saturday, April 25, 2009 18:59
To: ip
Subject: [IP] The Economic Crisis and its Implications for The Science of Economics
Prior to any Economic Manhattan project maybe a study of Ethical behavior in the financial area would be more profitable djf
Date: April 25, 2009 3:22:35 PM EDT
Subject: The Economic Crisis and its Implications for The Science of Economics
For IP if you think it worthy:
Dave,
I'd like to call the attention of IP readers to an interdisciplinary conference on The Economic Crisis and its Implications for The Science of Economics being held in Toronto May 1-4 at the Perimeter Institute and to a talk being given in the EE Computer Systems Colloquium at Stanford this Wednesday, April 29th. Both are related to the current financial crisis and what we might do, as scientists and engineers, to help resolve the situation.
CONFERENCE:
For more information on the conference.
http://www.perimeterinstitute.ca/en/Events/The_Economic_Crisis_and_Implications_for_Science/The_Economic_Crisis_and_its_Implications_for_The_Science_of_Economics/
Registration is required (seating is limited) but there is no charge for the event.
From the Conference Abstract:
Concerns over the current financial situation are giving rise to a need to evaluate the very mathematics that underpins economics as a predictive and descriptive science. A growing desire to examine economics through the lens of diverse scientific methodologies - including physics and complex systems - is making way to a meeting of leading economists and theorists of finance together with physicists, mathematicians, biologists and computer scientists in an effort to evaluate current theories of markets and identify key issues that can motivate new directions for research. Perimeter Institute was suggested to be the gathering point and conference organizers plan to foster a very careful, dispassionate discussion, in an atmosphere governed by the modesty and open mindedness that characterizes the scientific community.
COLLOQUIUM:
One of the conference organizers, Eric Weinstein, will be speaking in the Stanford EE Computer Systems Colloquium (http://ee380.stanford.edu) Wednesday 4:15-5:30PM Pacific. He will argue for the need to have a broadly based, interdisciplinary "Economic Manhattan Project", a global effort to develop sophisticated quantitative models and tools that could be used to guide us out of the financial/economic current crisis.
Eric's lecture will be given before a live audience in the Gates Computer Science Building (room B1) on the Stanford Campus; this is a public lecture and anyone is welcome to attend. The lecture will be available over the Internet by webcast in real time (questions via Twitter) and will be available for on-demand viewing from the Colloquium website about an hour or two following completion of the talk. In time, Colloquium lectures are available on YouTube and iTunes and other distribution channels. See the website for details.
Dennis Allison
Computer Systems Laboratory
Stanford University
