Bernanke's Financial Modeling Technology
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Bernanke's Financial Modeling Technology
 
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http://www.theregister.co.uk/2008/10/03/us_economy_model/ "...it implements the 20 equations to describe the economy during a credit
crunch in a programming language called Matlab from MathWorks." I'm sorry, but all I can say is "Fuck me to tears." The US's head financier is an idiot. -- Doug Roberts, RTI International [hidden email] [hidden email] 505-455-7333 - Office 505-670-8195 - Cell ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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A couple of points:
On Fri, Oct 3, 2008 at 8:03 PM, Douglas Roberts <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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In reply to this post by Douglas Roberts-2
Douglas Roberts wrote:
> /"...it implements the 20 equations to describe the economy during a > credit crunch in a programming language called Matlab from MathWorks/." oooooh, ahhhh. <sob> ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
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In reply to this post by Robert Holmes
Answer to #2: No, but I'm pretty damn sure 20 differential equations don't capture the market dynamics necessary to accurately model the US/World economy.
On Fri, Oct 3, 2008 at 12:18 PM, Robert Holmes <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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Kinda depends on what he's trying to model. If you mean "predict $ vs Euro, price of gas, price of Wachovia stock one year from now" you are right. But if he's modeling hugely aggregated stuff (inflation, GDP, unemployment, national debt) and the impact his policies would have then it's quite possible he'll get just as robust results from a "simplistic" model as he would from some zillion parameter simulation.
Robert On Fri, Oct 3, 2008 at 8:22 PM, Douglas Roberts <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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You're right of course. I mean, look at the wonderful guidance his model has provided so far. Positively robust. It certainly helped predict our current "credit crunch".
Didn't it? Sorry, I believe Bernanke is every bit as inept as many of the rest of our top officials, and I don't believe toy models will ever suffice at predicting the behavior of large, complex systems such as the US economy. Sadly, it didn't surprise me to discover that this is exactly what Bernanke was trying to do. --Doug On Fri, Oct 3, 2008 at 12:36 PM, Robert Holmes <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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In reply to this post by Robert Holmes
Robert Holmes wrote:
> But if he's modeling hugely aggregated stuff (inflation, GDP, > unemployment, national debt) and the impact his policies would have > then it's quite possible he'll get just as robust results from a > "simplistic" model as he would from some zillion parameter sim The "impact his policies would have" are probably guided in no small way by how easy it is to model proposed policy changes and their consequences. It's easy to model to decreasing a store of high-risk assets amongst a specific set of banks Less easy to model a future where we let some big banks crash and burn and then deal with the current need consumers have for credit with other kinds of government intervention. Marcus ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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In reply to this post by Douglas Roberts-2
Thus spake Douglas Roberts circa 10/03/2008 11:03 AM:
> http://www.theregister.co.uk/2008/10/03/us_economy_model/ > > *"...it implements the 20 equations to describe the economy during a credit > crunch in a programming language called Matlab from MathWorks*." Damn. I was hoping to see an http link where I could download the *.m files. I'm pretty sure the www existed in 1996. [grin] I don't suppose Bernanke, Gertler, and Gilchrist were devotee's of Stallman, though. So, it's unlikely they'd expose the source for their model, at least not on purpose. Nick's Posting Criteria a, b, c, and d are satisfied, I think. -- glen e. p. ropella, 971-219-3846, http://tempusdictum.com ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
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Nick needs to add a category:
e) Really, REALLY pissed off about something really REALLY stupid. On Fri, Oct 3, 2008 at 12:58 PM, glen e. p. ropella <[hidden email]> wrote: Thus spake Douglas Roberts circa 10/03/2008 11:03 AM: -- Doug Roberts, RTI International [hidden email] [hidden email] 505-455-7333 - Office 505-670-8195 - Cell ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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In reply to this post by Douglas Roberts-2
Look at this way then - if he'd had access to a zillion parameter mega-simulation, do you think we'd all be safe and cozy and wouldn't be in the middle of a financial crisis?
R
On Fri, Oct 3, 2008 at 12:49 PM, Douglas Roberts <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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Thus spake Robert Holmes circa 10/03/2008 12:15 PM:
> Look at this way then - if he'd had access to a zillion parameter > mega-simulation, do you think we'd all be safe and cozy and *wouldn't* be in > the middle of a financial crisis? [You guys need to trim the cruft off the bottom of your e-mails.] I think we would be in a better position. If nothing else, the existence and use of zillion parameter mega-simulations _force_ us to concede that models are often wrong and useless. Granted, there are still morons who think that there _can_ be accurate or True models. But if more people in powerful positions knew, tacitly, how bad most models are, they would be much more suspicious of their and others' policy decisions (which are all based on models of one sort or another). At least these guys had the sense to reify their models in some way, rather than merely shooting from the hip and listening to their gut. You gotta give them that much credit. We may not avert crises; but, we might soften them considerably. NPC: a, b, and d are satisfied. (c) might be a stretch. [grin] -- glen e. p. ropella, 971-219-3846, http://tempusdictum.com ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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In reply to this post by Robert Holmes
Robert,
I think the odds are greater (in the sense that *any* number is greater than zero) for a high-res. simulation to produce higher quality results than what his toy model provided. You are obviously of the the camp that "there is no such thing as a large, complex simulation which can produce useful results". I occupy the other camp. Further, I contend that if our esteemed (using the next term loosely now) "leaders" had spent one tiny little fraction of the $700B pork-rich bill that they just passed to develop a quality, highly-resolved simulation of the US economic system, say, 6 years ago, and
The realities of our government's top-level decision-making process being what they are, however, mean that even with a simulation that produced dead-nuts-on results, we'd probably still be in exactly the same situation as we are today. --Doug On Fri, Oct 3, 2008 at 1:15 PM, Robert Holmes <[hidden email]> wrote:
-- Doug Roberts, RTI International [hidden email] [hidden email] 505-455-7333 - Office 505-670-8195 - Cell ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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In reply to this post by Robert Holmes
Robert Holmes wrote:
> Look at this way then - if he'd had access to a zillion parameter > mega-simulation, do you think we'd all be safe and cozy and /wouldn't/ > be in the middle of a financial crisis? Yes, then there would be doubt. A N^zillion reasonable scenarios probably with many different outcomes. Thus reasonable doubt and reasonable regulation instead of a race horse running off a cliff with blinders on. ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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What are we hoping a better model will show? Whether the economy will dive off a cliff because the credit markets freeze? That seems to be the driving force as far as this crisis is concerned.
So how can one model whether the credit markets will freeze -- or would have frozen or may still freeze if the $700b bailout wasn't passed? I'm not sure there is a very good model for that no matter how many agents one includes. In addition, whatever the model, the negative outcome is so terrifying to most people that even if the model predicts a relatively small chance of it occurring, probably nothing different would have happened. At this point, I'm not convinced the problem (with deciding what to do today in this crisis) is a matter of having inadequate models. That may have helped earlier, but now it mainly politics and fear. And speaking of fear, here are the first 2 paragraphs (with emphasis added) from a good column. This is the first
time in the history of the United States that the president has sought
to provoke a financial panic to get legislation through Congress.
[Emphasis added.] While this has proven to be a successful political
strategy, it marks yet another low point in American politics. It was incredibly irresponsible for President Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said that, 'we have nothing to fear, but fear itself.' -- Russ Abbott _____________________________________________ Professor, Computer Science California State University, Los Angeles o Check out my blog at http://russabbott.blogspot.com/ On Fri, Oct 3, 2008 at 12:29 PM, Marcus G. Daniels <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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I would have thought this was obvious: that allowing large financial organizations such as Fannie May, Freddie Mac, and AIG to play the derivatives market on unsecured (i.e. leveraged) assets would lead to our current economic meltdown.
The real-world limiting issue is what would our quality "leadership" done with such information if it had been made available to them 3 years ago? On Fri, Oct 3, 2008 at 1:52 PM, Russ Abbott <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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And speaking of obvious:
We are now in the position of operating with 20-20 hindsight with regards to the current economic mess. Imagine that three years ago it was announced that a highly-resolved economic simulation was available that could simulate the US economy 3 years into the future. What are the odds that there would have been anybody around with sufficient domain knowledge, foresight, and modeling expertise to run a parameter sweep that would have captured our current real-life economic scenario? Nothing I'd bet on. -- Doug Roberts, RTI International [hidden email] [hidden email] 505-455-7333 - Office 505-670-8195 - Cell On Fri, Oct 3, 2008 at 2:04 PM, Douglas Roberts <[hidden email]> wrote:
============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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In reply to this post by Douglas Roberts-2
All --
How reality meets modeling: From Forbes.com ( http://www.forbes.com/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html ) : " In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. "It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number." " My guess is that rather than using that bogus "modeling" stuff, they just used an "oracle" approach (i.e., asked a bunch of people, "What's a really large number?" and then, from the answers, picked one that didn't have "trillion" in it, and started with "lucky number 7" . . .) At least some spokesperson is being honest about their "methodology" . . . tom On Oct 3, 2008, at 11:03 AM, Douglas Roberts wrote: > > http://www.theregister.co.uk/2008/10/03/us_economy_model/ > > "...it implements the 20 equations to describe the economy during a > credit crunch in a programming language called Matlab from MathWorks." > > > > I'm sorry, but all I can say is "Fuck me to tears." The US's head > financier is an idiot. > > -- > Doug Roberts, RTI International > [hidden email] > [hidden email] > 505-455-7333 - Office > 505-670-8195 - Cell > ============================================================ > FRIAM Applied Complexity Group listserv > Meets Fridays 9a-11:30 at cafe at St. John's College > lectures, archives, unsubscribe, maps at http://www.friam.org ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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In reply to this post by Douglas Roberts-2
Douglas Roberts wrote:
> Imagine that three years ago it was announced that a highly-resolved > economic simulation was available that could simulate the US economy 3 > years into the future. What are the odds that there would have been > anybody around with sufficient domain knowledge, foresight, and > modeling expertise to run a parameter sweep that would have captured > our current real-life economic scenario? Maybe the issue needs to be taken out of the narrow financial domain? e.g. http://www.dhs.gov/xabout/structure/gc_1166220191042.shtm ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
Re: Bernanke's Financial Modeling Technology
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DHS is not exactly a paradigm for excellence, but on the other hand how much worse could they be than the Federal Reserve at protecting the economy?
On Fri, Oct 3, 2008 at 3:31 PM, Marcus G. Daniels <[hidden email]> wrote:
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Re: Bernanke's Financial Modeling Technology
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Douglas Roberts wrote:
> DHS is not exactly a paradigm for excellence, but on the other hand > how much worse could they be than the Federal Reserve at protecting > the economy? Just thinking out loud about how to expediently fund such a modeling effort. ;-) ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org |
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