Economic Disequilibrium or How Complexity Science nearly killed America

[Peter-2-2]

http://www.make-digital.com/make/vol15/?pg=173

Here is a beautiful article by George Dyson that is truly one of the clearest examples of the current problems with complexity theory especially its relationship to economics , what it is trying to do and what it actually did with the mess created on wall street it should make every every CTO and CEO sit up and shudder.

Basically the credit models created by complexity science geniuses, that are the foundation of most high flying arbitrage financial houses, created there own version of  reality that had very little relevance to the real world.  These same geniuses made enormous amounts of money by designing this fake world and convincing there neophyte non tech masters they should be paid millions for its discovery conveniently forgetting that its roots were firmly built in fiction  Someone shouts the Emperor has no clothes and presto the whole house comes tumbling down

The FBI is also apparently digging into this cesspool so expect to see a large number of these bright software phds entering federal prison in the not to distant future

It also has relevance to the scary statement by Janet Wing at the institute when she said that future computer models need not be grounded in reality but could create there own.

Think also on the connection that not only are these complex models non verifiable but so are most databases and agent modeling systems. Without easy verifiability I would submit they are worse than
 useless

As Dyson points out the tally sticks " stocks" that where used in the 13th century are far superior to the billions of dollars of hardware and software used today. A stick " Stock " lived in the real world and was verifiable at the lowest level of inspection. Sadly today our complex system have proved to be totally non verifiable with the associated collapse of trust.

Its also a stark example to our 1st mile friends about the higher relevance of what goes into the pipe rather than the pipe itself and why hi speed verification of what is happening in the real world is so much more important

The quicker we realize that the raison d'etre of the digital world is to improve the quality of life and include some moral directives in our work based in reality the more we will be able to sleep at night

( : ( : pete

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[glen ep ropella]

Hey Pete,

That's definitely an interesting extrapolation from that Make article.
I love stuff like that.  Thanks.

But can you help me reduce my ignorance?  Which "complexity science
geniuses" created these credit models?  And which ones do you think
might go to jail?

-glen

Thus spake peter circa 09/30/2008 11:06 AM:

> http://www.make-digital.com/make/vol15/?pg=173
>
> Here is a beautiful article by George Dyson that is truly one of the
> clearest examples of the current problems with complexity theory
> especially its relationship to economics , what it is trying to do and
> what it actually did with the mess created on wall street it should make
> every every CTO and CEO sit up and shudder.
>
> Basically the credit models created by complexity science geniuses, that
> are the foundation of most high flying arbitrage financial houses,
> created there own version of  reality that had very little relevance to
> the real world.  These same geniuses made enormous amounts of money by
> designing this fake world and convincing there neophyte non tech masters
> they should be paid millions for its discovery conveniently forgetting
> that its roots were firmly built in fiction  Someone shouts the Emperor
> has no clothes and presto the whole house comes tumbling down
>
> The FBI is also apparently digging into this cesspool so expect to see a
> large number of these bright software phds entering federal prison in
> the not to distant future
>
> It also has relevance to the scary statement by Janet Wing at the
> institute when she said that future computer models need not be grounded
> in reality but could create there own.
>
> Think also on the connection that not only are these complex models non
> verifiable but so are most databases and agent modeling systems. Without
> easy verifiability I would submit they are worse than
> useless
>
> As Dyson points out the tally sticks " stocks" that where used in the
> 13th century are far superior to the billions of dollars of hardware and
> software used today. A stick " Stock " lived in the real world and was
> verifiable at the lowest level of inspection. Sadly today our complex
> system have proved to be totally non verifiable with the associated
> collapse of trust.
>
> Its also a stark example to our 1st mile friends about the higher
> relevance of what goes into the pipe rather than the pipe itself and why
> hi speed verification of what is happening in the real world is so much
> more important
>
> The quicker we realize that the raison d'etre of the digital world is to
> improve the quality of life and include some moral directives in our
> work based in reality the more we will be able to sleep at night

--
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

[Paul Paryski]

I totally agree with Pete and might add from personal experience that the same persons who create and use such models, also create and use rumours and other very questionable methods to manipulate the market, aside. of course, from the highly risky hedge funding (we had long discussions at the FRIAM meetings about using hedging to pay for health care; I was totally opposed).  Unfortunately many of the financial asset managers acted exactly like the CEO and others at ENRON.  I believe they are criminal and motivated by greed and fear (like so much othe culture and media now).  The empire is perhpas crumbling.  Non-regulated markets generally fail in the end.

As ex UN environmental governance expert and seeing how countries are inadequately reacting to global warming and other environmental threats, I believe that it is time to rationally analyze the balance between natural resources and human needs and find a more sustainable models.  Jared Diamond points out this necessity in his book Collapse.

I also would like to see all complexity modelers adept a code of principles and morality to avoid the misuses of complexity, e.g., torture, military aggression, financial manipulations. etc.

Enough, Perhaps too much.  Please excuse my rage.

Paul Paryski



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[Marcus G. Daniels]

[hidden email] wrote:
> The empire is perhpas crumbling.
Nah.  Dow is already back 400 points so far.   If it would just have
slid a little more then there would have been some really good buys!

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[Douglas Roberts-2]

Judging by what yesterday did to my 401(k), there were some outstanding buys at 7:30am (MDT) this morning.

--
Doug Roberts, RTI International
[hidden email]
[hidden email]
505-455-7333 - Office
505-670-8195 - Cell

On Tue, Sep 30, 2008 at 1:40 PM, Marcus G. Daniels <[hidden email]> wrote:

[hidden email] wrote:
> The empire is perhpas crumbling.

Nah.  Dow is already back 400 points so far.   If it would just have
slid a little more then there would have been some really good buys!

============================================================
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Meets Fridays 9a-11:30 at cafe at St. John's College
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[Paul Paryski]

In a message dated 9/30/08 1:42:10 PM, [hidden email] writes:

[hidden email] wrote:
> The empire is perhaps crumbling.
Nah.  Dow is already back 400 points so far.   If it would just have
slid a little more then there would have been some really good buys!

Ah were it so simple (n complexity pun intended).  If only the bailout included a provision to temporarily reduce mortgage payments for those in need and put a little cash in consumers' hands, while trully partially nationalizing the failed banks with citizen holding the shares.  Sigh, Paul





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[Paul Paryski]

PS did anyone answer Pete's question as to the identity of the creators of the financial market complexity models?  Paul


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[Phil Henshaw-2]

That’s a good example of the way models fail as I’ve been describing.   We make models as projections of how things made sense in the past and not to have any awareness of the future except their own failure.  That’s where my method kicks ass. 

 

I don’t have the fancy tools others do, but I watch the environment for the divergent processes that are emerging and ask the dumb questions, like what will they run into and how will they be changed by it.   One thing that happens when growth system collide with their limits is that their independent parts run into each other.    I pegged this whole thing 16 months ago (and 30 years ago as well) and spotted the collision between the growth centers of energy and food (evident in the global price war bio-ethanol was part of touching off) and how that started a series of unexpected changes in direction.    I called it the beginning of “the big crunch” and the control system misbehavior “fishtailing”.   If people want to know what to do to reduce the level of the calamity even at this point they should ask.

 

Phil Henshaw

 

From: [hidden email] [mailto:[hidden email]] On Behalf Of peter
Sent: Tuesday, September 30, 2008 2:06 PM
To: The Friday Morning Applied Complexity Coffee Group; 1st-Mile-NM
Subject: [FRIAM] Economic Disequilibrium or How Complexity Science nearly killed America

 

http://www.make-digital.com/make/vol15/?pg=173

Here is a beautiful article by George Dyson that is truly one of the clearest examples of the current problems with complexity theory especially its relationship to economics , what it is trying to do and what it actually did with the mess created on wall street it should make every every CTO and CEO sit up and shudder.

Basically the credit models created by complexity science geniuses, that are the foundation of most high flying arbitrage financial houses, created there own version of  reality that had very little relevance to the real world.  These same geniuses made enormous amounts of money by designing this fake world and convincing there neophyte non tech masters they should be paid millions for its discovery conveniently forgetting that its roots were firmly built in fiction  Someone shouts the Emperor has no clothes and presto the whole house comes tumbling down

The FBI is also apparently digging into this cesspool so expect to see a large number of these bright software phds entering federal prison in the not to distant future

It also has relevance to the scary statement by Janet Wing at the institute when she said that future computer models need not be grounded in reality but could create there own.

Think also on the connection that not only are these complex models non verifiable but so are most databases and agent modeling systems. Without easy verifiability I would submit they are worse than
 useless

As Dyson points out the tally sticks " stocks" that where used in the 13th century are far superior to the billions of dollars of hardware and software used today. A stick " Stock " lived in the real world and was verifiable at the lowest level of inspection. Sadly today our complex system have proved to be totally non verifiable with the associated collapse of trust.

Its also a stark example to our 1st mile friends about the higher relevance of what goes into the pipe rather than the pipe itself and why hi speed verification of what is happening in the real world is so much more important

The quicker we realize that the raison d'etre of the digital world is to improve the quality of life and include some moral directives in our work based in reality the more we will be able to sleep at night

( : ( : pete

--

Peter Baston

IDEAS

www.ideapete.com

 

 

 

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[Phil Henshaw-2]

The flaw in models is that they’re used to reinforce our belief in determinism.   Believing determinism is what keeps us from learning the right questions to ask about things that behave out of control.     One of the very first things you find out if you actually take an interest in them is that the ‘cause’ for most self-animating processes is 99% opportunity and that development is what you watch to see where the opportunity is and is not being found.    That it, once you’re curious about it.

 

Taking growth till all the independent parts of the system collide with each other, has many highly predictable consequences that you can see coming a long way off.

 

Phil

 

 

From: [hidden email] [mailto:[hidden email]] On Behalf Of [hidden email]
Sent: Tuesday, September 30, 2008 3:50 PM
To: [hidden email]
Subject: Re: [FRIAM] Economic Disequilibrium or How Complexity Science nearly killed America

 

PS did anyone answer Pete's question as to the identity of the creators of the financial market complexity models?  Paul


**************
Looking for simple solutions to your real-life financial challenges? Check out WalletPop for the latest news and information, tips and calculators.
(http://www.walletpop.com/?NCID=emlcntuswall00000001)

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Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org

[Robert Holmes]

Can't be complexity scientists - the math is too hard. Show your average ABMer a partial differential equation and he'd run a mile.

Robert

On Tue, Sep 30, 2008 at 9:49 PM, <[hidden email]> wrote:

PS did anyone answer Pete's question as to the identity of the creators of the financial market complexity models?  Paul

**************
Looking for simple solutions to your real-life financial challenges? Check out WalletPop for the latest news and information, tips and calculators.
(http://www.walletpop.com/?NCID=emlcntuswall00000001)

============================================================
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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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[Owen Densmore]

On Oct 1, 2008, at 1:02 AM, Robert Holmes wrote:
> Can't be complexity scientists - the math is too hard. Show your  
> average
> ABMer a partial differential equation and he'd run a mile.
> Robert

I have to agree.  The pendulum really needs to swing back again.  The  
lack of formalism within the ABM world is, in my mind, indicative of a  
broader issue: we tend to specialize too much.

ABMers are great at their domain, Mathematicians at theirs.  Neither  
are broad enough to grok their counterparts.

We've seen this in a recent redfish project: the scope is quite wide,  
including google maps GIS using Javascript, the django webapp  
framework, google app engine datastore and "cloud" deployment system,  
SVN code management, XHTML/CSS, and AJAX.  Whew!

We'd like to include "agency" as well, so I guess its on the ABM side  
of the equation. But I suspect mathematics will have to sneak in too,  
at least Statistics/Bayesian inference.

On the top of that mountain, traditional ABM seems a bit amateur.

    -- Owen




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[Kenneth Lloyd]

Owen,

Complexity science (the study of objective complexity) is only complex
(subjectively complex) if you don't understand how it works. There are a
series of mappings from natural language, through graphical language, to
mathematical languages that help folks understand how complexity works.

But like learning to speak French, or learning to draw correct perspective,
these languages take a little effort to learn.  If people will "run a mile"
to avoid something that presents a little difficulty - or that doesn't
pre-exist in their toolbox of universal knowledge - then complex systems
will forever remain out of reach.

Ken

Learning to read Chinese is hard - math much less so.

> -----Original Message-----
> From: [hidden email]
> [mailto:[hidden email]] On Behalf Of Owen Densmore
> Sent: Wednesday, October 01, 2008 7:04 AM
> To: The Friday Morning Applied Complexity Coffee Group
> Subject: Re: [FRIAM] Economic Disequilibrium or How
> Complexity Sciencenearly killed America
>
> On Oct 1, 2008, at 1:02 AM, Robert Holmes wrote:
> > Can't be complexity scientists - the math is too hard. Show your
> > average ABMer a partial differential equation and he'd run a mile.
> > Robert
>
> I have to agree.  The pendulum really needs to swing back
> again.  The lack of formalism within the ABM world is, in my
> mind, indicative of a broader issue: we tend to specialize too much.
>
> ABMers are great at their domain, Mathematicians at theirs.  
> Neither are broad enough to grok their counterparts.
>
> We've seen this in a recent redfish project: the scope is
> quite wide, including google maps GIS using Javascript, the
> django webapp framework, google app engine datastore and
> "cloud" deployment system, SVN code management, XHTML/CSS,
> and AJAX.  Whew!
>
> We'd like to include "agency" as well, so I guess its on the
> ABM side of the equation. But I suspect mathematics will have
> to sneak in too, at least Statistics/Bayesian inference.
>
> On the top of that mountain, traditional ABM seems a bit amateur.
>
>     -- Owen
>
>
>
>
> ============================================================
> 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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[Phil Henshaw-2]

One of the cool things about ordinary differential equations is that if you found one in nature, and all you had was a very very short segment, you could still theoretically  obtain the entire future and past behavior of the curve from it.    There are lots of events in nature something like that, say planetary motion for example, where there’s no particular beginning or end.   Then there’s the other kind, like a car on the highway for which the limits and behavior depend on local steering.   For steering a car there may be no evidence in the car’s behavior that it is about to hit a tree, except perhaps that the driver is asleep.    Similarly there is no evidence of lightning or other opportunistic behaviors until after they happen, etc…

 

I’ve been talking about that kind of behavior, where the system and the environment have high degrees of independence and not getting much response from you guys.    Maybe I just don’t know what method you use to distinguish between systems that operate IN the environment and subject discovering their limits and constraints and systems that effectively express all their past and future constraints all the time?

 

Do you recognize that as a difference between how things?    If so, how do you define or make the destinction?

 

 

Best,

Phil Henshaw                www.synapse9.com                       ¸¸¸¸.·´ ¯ `·.¸¸¸¸

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
212-795-4844 680 Ft.Washington Ave NY NY 10040 [hidden email]

"it's not finding what people say interesting, but finding the interest in what they say"

 

 

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[Marcus G. Daniels]

Kenneth Lloyd wrote:
> If people will "run a mile"
> to avoid something that presents a little difficulty - or that doesn't
> pre-exist in their toolbox of universal knowledge - then complex systems
> will forever remain out of reach.
>  
He's lost it.  Now he's making derogatory remarks about running!  :-)

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[Gus Koehler-2]

In response see: Mark Buchanan, This Economy Does Not Compute, in the New York Times today (attached).

 

Gus Koehler, PhD., CEO 

 

www.timestructures.com

1545 University Avenue
Sacramento, CA 95825
916.564.8683   Fax: [phone]

Cell: 916.716.1740

www.timestructures.com
[hidden email]

 

---

From: [hidden email] [mailto:[hidden email]] On Behalf Of peter
Sent: Tuesday, September 30, 2008 11:06 AM
To: The Friday Morning Applied Complexity Coffee Group; 1st-Mile-NM
Subject: [FRIAM] Economic Disequilibrium or How Complexity Science nearlykilled America

http://www.make-digital.com/make/vol15/?pg=173

Here is a beautiful article by George Dyson that is truly one of the clearest examples of the current problems with complexity theory especially its relationship to economics , what it is trying to do and what it actually did with the mess created on wall street it should make every every CTO and CEO sit up and shudder.

Basically the credit models created by complexity science geniuses, that are the foundation of most high flying arbitrage financial houses, created there own version of  reality that had very little relevance to the real world.  These same geniuses made enormous amounts of money by designing this fake world and convincing there neophyte non tech masters they should be paid millions for its discovery conveniently forgetting that its roots were firmly built in fiction  Someone shouts the Emperor has no clothes and presto the whole house comes tumbling down

The FBI is also apparently digging into this cesspool so expect to see a large number of these bright software phds entering federal prison in the not to distant future

It also has relevance to the scary statement by Janet Wing at the institute when she said that future computer models need not be grounded in reality but could create there own.

Think also on the connection that not only are these complex models non verifiable but so are most databases and agent modeling systems. Without easy verifiability I would submit they are worse than
 useless

As Dyson points out the tally sticks " stocks" that where used in the 13th century are far superior to the billions of dollars of hardware and software used today. A stick " Stock " lived in the real world and was verifiable at the lowest level of inspection. Sadly today our complex system have proved to be totally non verifiable with the associated collapse of trust.

Its also a stark example to our 1st mile friends about the higher relevance of what goes into the pipe rather than the pipe itself and why hi speed verification of what is happening in the real world is so much more important

The quicker we realize that the raison d'etre of the digital world is to improve the quality of life and include some moral directives in our work based in reality the more we will be able to sleep at night

( : ( : pete

============================================================
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

[glen ep ropella]

Thus spake Owen Densmore circa 10/01/2008 06:04 AM:

> On Oct 1, 2008, at 1:02 AM, Robert Holmes wrote:
>> Can't be complexity scientists - the math is too hard. Show your  
>> average
>> ABMer a partial differential equation and he'd run a mile.
>> Robert
>
> I have to agree.  The pendulum really needs to swing back again.  The  
> lack of formalism within the ABM world is, in my mind, indicative of a  
> broader issue: we tend to specialize too much.
>
> ABMers are great at their domain, Mathematicians at theirs.  Neither  
> are broad enough to grok their counterparts.

Well, I suppose I have to jump in, here.  This false dichotomy between
"math" and "agent-based computer programs" is pretty annoying.

Programming languages _are_ formalisms.  Programs are mathematical.
True, it's not continuum math riding on top of definitions like the
limit, density, and analyticity.  But it is math, nonetheless.

The real problem isn't that agent-based systems (never mind _models_ for
the moment) lack formality.  The problem also isn't that ABMers lack
mathematical skills (because programming is mathematics).

The problem is that everybody's so lazy that we always and everywhere
slump back home to comfy familiarity because working outside our own
particular domain is HARD.  For example, constructing theorems within
messy formalisms like a systems programming language is _way_ too
difficult for someone comfy in the historical infrastructure of
continuum math.

In other words, it's not just the ABMers who are lazy.

But I don't precisely agree with Owen either.  It's not a pendulum
swinging between two extremes.  Nor is it (necessarily) a problem of
specialization.  It's a cultural problem where each individual is reared
to be non-confrontational and non-critical while simultaneously being
encouraged towards hubris and posturing.

[grin]  Sorry for the interruption.

--
glen e. p. ropella, 971-219-3846, http://tempusdictum.com


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[Peter-2-2]

Sure I will dig out some names but to simplify step 1 - Anyone who has QUANT or Financial Engineer or Financial Data Engineer ( They used to quantify now they just design and operate the Complexity models ) on their business card and works at Lehman Brothers / AIG or Fannie Duo / WAMU etc

More fun here http://www.technologyreview.com/blog/editors/22132/#comment-205229

I have info but ts not verified yet that a group of the Quants at Lehman running the SAME ( Used at LTC and the Big E ) system came from Long Term Capital and Enron -----------WOW thats credibility They are now moving to Barclay's and Sumitomo Mitsui etal ( maybe they have a Yen for more destruction Ouch )

Also mulling a model tree to track these guys and gals through their carrier path with the associated negative cash damage as a result

Had some interesting calls today from mad as hell legal beagles on verifiability of complexity models with the simple parameter that if you cannot independently verify and at the same time are calling a fund secured you have committed fraud and have opened the fund and insurers to humugo legal action both civil and federal

It sounds like some expert testimony will be needed so if you want to play let me know and I will make up a list of who / quals / rates etc

Talk about " we plan God laughs "

( : ( : pete


glen e. p. ropella wrote:

Hey Pete,

That's definitely an interesting extrapolation from that Make article.
I love stuff like that.  Thanks.

But can you help me reduce my ignorance?  Which "complexity science
geniuses" created these credit models?  And which ones do you think
might go to jail?

-glen

Thus spake peter circa 09/30/2008 11:06 AM:
  

http://www.make-digital.com/make/vol15/?pg=173

Here is a beautiful article by George Dyson that is truly one of the

    

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Meets Fridays 9a-11:30 at cafe at St. John's College
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