Sunday, April 19, 2009

Recession Playlist

The previously mentioned upcoming PI conference "The Economic Crisis and its Implications for The Science of Economics" now has a schedule to offer. Looks like it's going to be tremendously interesting! 

And here is the playlist you need to appropriately prepare for the event:

78 comments:

Andreas said...

Eat the Rich - Motörhead

Luke said...

Money - Pink Floyd

Phil Warnell said...

Hi Bee,


Sixteen Tons -Johnny CashBest,

Phil

sciencetourist said...

Money (makes the World Go Around) - Cabaret

Money - Isley Brothers

C.R.E.A.M (Cash Rules Everything Around Me) - Wu Tang Clan

You Never Give Me Your Money - The Beatles ("you only give me your funny paper")

Andrei Kirilyuk said...

“Looks like it's going to be tremendously interesting!”

Really? Or is it rather going to be a usual random agglomeration of senseless over-simplified “models” and pseudo-scientific “philosophy” having nothing to do with real phenomena understanding, let alone their reliable control? This is what clearly follows already from the conference abstracts and well-known results of always the same “elitary thinkers” (actually at the origin of the crisis). Some arbitrary mixture of “syntax”, “physics”, “economy” and “morals” accompanied by ugly computer games, “leading scientists” without any professional level (as confirmed by their results) and coherent, universal definitions of at least major notions at stake (such as real system complexity)... Who needs such “great science”, who supports it and why, especially in such truly dramatic times (though not for the “leading scientists”!)? If a major failure happens in any other field of human activity, its “leading” figures and administration are immediately replaced by more promising ones and often punished. But in science any kind of persisting failure (for decades) and obvious professional inaptitude (to solve major problems) leading to hard crises, in science and elsewhere, are only further remunerated by ever more luxurious profits, divine prises and paradise working conditions for always the same “high priests”, while no new, provably problem-solving approach can ever be permitted (let alone favoured) in principle. As the conference announcement says, “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”. So when they need to provide the expected results, they are very, very “modest”, “careful” and “dispassionate”, but are they equally “modest”, “careful” and “dispassionate” when they fight for and get their own, peaking and crisis-proof (always boosted!) personal profits in exchange for that professional “modesty” (absent useful results)?

Therefore, better consider It's a Sin by Pet Shop Boys as a truly relevant addition to the playlist. And listen attentively to the words meaning “whatever you do, you do it wrong”. Something that becomes surrealistically exact for today's ruling “elites”, with all their “leading professionals” and clearly perceived results, including hasty self-interested “regulations”, hypocritical “good intentions” and empty “open-mindedness” exclusively in favour of always the same, multiply and catastrophically failed “leaders” and approaches. And the poor unaware “humanity” ruthlessly sacrificed in favour of suicidal “personal ambitions” of its self-designated, fruitless intellectual “elites”... It's a sin indeed, promising to be the fatal one for the whole civilisation if nothing else can find real support and development.

What about a sequel conference entitled “Scientific Crisis and Its Deadly Implications for Economy and the Future of Humanity”? Immodest and passionate, this one, in its emphasis on provably consistent solutions to real problems based on causally complete understanding of real system dynamics. Support the truth, stop the recession. Instead of “forget the truth, support our officially leading scientists”. Shut up and listen to our playlist.

You see, Jean-Philippe, when you say that today European [but actually all leading] countries “must” reassert genuine creativity as the centre of efforts: and now this is how they tend to use in practice all their specially dedicated, high resources, in such a critical, change-inviting moment as ours. It's the very meaning of real, universally defined sin: when one avoids realising just that most important vocation that one objectively must realise, in this particular time and in that particular position. The difference between Europe and Northern America is only in propagandistic loudness of equally empty show-business campaigns, called either “science”, or “politics”, or “economy”... Needless to say, it's your unconditionally “best”, uniquely supported ones. For me, it is this dominating nothingness that is boring, while the so necessary real evolution would be fascinating. But even if you prefer waiting for a miracle to the miracle itself, the time of waiting for a feasible miracle quickly elapses...

Christine said...

I think this is all very bizarre. I fail to see what fundamental physics at PI has to do with economics. Even if some non-linear modeling is eventually claimed to describe/predict economic tendencies, what does it have to do with fundamental physics? For what is worth, I find it tremendously non-interesting, but never mind.

Low Math, Meekly Interacting said...

The Dead Kennedy's "Kill the Poor" might at a nice Swiftian touch.

Andreas said...

But the following 'Riot' (Dead Kennedys again) might set things straight.

Bee said...

Hi Christine,

You are asking a good question and one that I believe many people might be asking themselves. Though I can't speak for the organizers, I'd like to share my point of view.

For one, one can have a long discussion about what is 'fundamental' and what isn't, the question being whether reductionism is always the right way towards insights. I personally don't think so. I believe that many of the puzzles we are faced with in physics today will eventually turn out to have been so hard to understand exactly because we were applying a reductionist approach where we should have been looking for something different.

That having been said, I think that there are much more connections between the social and the natural sciences than we presently understand, and the beginning of this understanding reflects in areas like network science or complex system. Theoretical physics and economy make a particularly nice example in which people have worked together for many decades to explore new ways.

You know from my blog that I think the connection between the social, the natural and the computer sciences will be strengthened in the soon future and has the potential change our world dramatically.

As far as PI is concerned, I very much appreciate that events like this who do not fall directly into a research area represented here are supported nevertheless, and that the interdisciplinary effort is encouraged. In this particular case, I find it also for organizational reasons a good idea, for an academic institution that doesn't have any stakes in the questions discussed can provide a neutral ground to lead arguments that might run into a gridlock at more opinionated places.

Last but not least, I think that we as scientists in general have a responsibility to do our best that academic research is of use for the well-being of our societies. And if that doesn't seem to work as it should, we should take means to improve the situation, whether that is exactly our own area of research or not.

Besides this, it is simply a topic I am interested in and I think it is a great opportunity to learn something.

Best,

B.

Arun said...

The relation between economics and physics has been thought about for quite a while.

http://www.nytimes.com/2009/04/12/opinion/12zencey.htmlQuote:

Frederick Soddy, born in 1877, was an individualist who bowed to few conventions, and who is described by one biographer as a difficult, obstinate man. A 1921 Nobel laureate in chemistry for his work on radioactive decay, he foresaw the energy potential of atomic fission as early as 1909. But his disquiet about that power’s potential wartime use, combined with his revulsion at his discipline’s complicity in the mass deaths of World War I, led him to set aside chemistry for the study of political economy — the world into which scientific progress introduces its gifts. In four books written from 1921 to 1934, Soddy carried on a quixotic campaign for a radical restructuring of global monetary relationships. He was roundly dismissed as a crank.

He offered a perspective on economics rooted in physics — the laws of thermodynamics, in particular. An economy is often likened to a machine, though few economists follow the parallel to its logical conclusion: like any machine the economy must draw energy from outside itself. The first and second laws of thermodynamics forbid perpetual motion, schemes in which machines create energy out of nothing or recycle it forever. Soddy criticized the prevailing belief of the economy as a perpetual motion machine, capable of generating infinite wealth — a criticism echoed by his intellectual heirs in the now emergent field of ecological economics.

........

Problems arise when wealth and debt are not kept in proper relation. The amount of wealth that an economy can create is limited by the amount of low-entropy energy that it can sustainably suck from its environment — and by the amount of high-entropy effluent from an economy that the environment can sustainably absorb. Debt, being imaginary, has no such natural limit. It can grow infinitely, compounding at any rate we decide.

Whenever an economy allows debt to grow faster than wealth can be created, that economy has a need for debt repudiation. Inflation can do the job, decreasing debt gradually by eroding the purchasing power, the claim on future wealth, that each of your saved dollars represents. But when there is no inflation, an economy with overgrown claims on future wealth will experience regular crises of debt repudiation — stock market crashes, bankruptcies and foreclosures, defaults on bonds or loans or pension promises, the disappearance of paper assets.

Christine said...

Reducionism may be the current main approach to fundamental physics (something difficult to deny), but, on the other hand, I believe it has already been quite understood for many years now that many-body physical systems of collective interactions, phenomena in nature consisting of a collection of parts which non-linearly interact/couple among themselves, give rise to complex evolution/characterization that may require other approaches for a full understanding/description.

So, although I understand your point of view and arguments, because one may regard economics such a complex system -- I do not personally agree that economics can bring any clarifications to fundamental research in physics (may be the other way around).

I am quite used to interdisciplinary efforts, which has been all around me for some years now (some may perhaps call me an "interdisciplinary" person), I know many interdisciplinary colleagues, specially in applied computation, etc. But my point concerns the use of the "interdisciplinary" word: this is much like a magic word these days -- it does enrich/help the analysis or solution of certain problems and can be fruitful in many instances -- but it is not always the case, and I have some reservations when I see this word used all the time as the final savior or solution to all problems. And perhaps physics has much more to say to economics than the other way around. Or it may end up of being and "interdisciplinary waste of time" anyway. Or I may be wrong.

This is evidently, my personal position. If something interesting/useful to fundamental physics comes out from this conference, it will be excellent, but I am quite skeptic right now. I agree that it may be useful to other perspectives, as you mention, though.

In any case, perhaps the bizarre way I see all that reflects my own bias of simply not appreciating economics at all, to start off. I see it like adding some kind of noise/confusion/maculation to a subject (fundamental physics) already in noised/confusing/maculated state of affairs.


Best,
Christine

Christine said...

BTW, in a quite idealistic/naive vein, I admit, I strongly think that one of the main efforts of mankind today should be in *eliminating* economics completely from the face of the earth. It was useful at a certain stage of evolution, but now it is a completely illogical, individualisitc, performance-by-performance activity with no general/collective fruitful purpose, except to enrich/impoverish people into chaotic speculative waves of virtual wealth, or lack of it thereof. So it is incredible for me that people are trying to *understand* such a useless chaotic system instead of joining forces in order to eliminate it completely! Ok, I know it is impossible/idealistic, etc, specially if one cannot offer something better in place, I admit. That is why I wrote "never mind" previously... Perhaps I should keep myself quiet for now! Not really the kind of post I should be commenting...

Uncle Al said...

Economics is social engineering string theory. Mathematical phantasmagorias of unlimited numbers of solutions include none that testably correspond to empirical reality.

The Dow-Jones dropping 1000 points is Wall Street's way of asking for another $trillion or three. "...and your little 401(k), too."

60 Minutes two weeks ago did a major segment on America's remarkable gun and ammunition drought since November 2008. Federal, Remignton, Winchester are running flat out 24/7 and cannot stock shelves. ABC local news had a story this past Saturday. Everybody knows how economics corrects prediction vs. observation in the real world.

Arun said...

If the conference can keep physicists from having funny ideas like "*eliminating* economics completely from the face of the earth. It was useful at a certain stage of evolution...", it would have served a useful purpose.

I'm sorry, that idea of eliminating economics is not idealistic, it is silly. Unless the universe magically provides for all your needs, there has to be economics.

Phil Warnell said...

Hi Bee,

The way I look at it, why not give the physicists a crack at having the economy function better? After all the economists along with the bankers; captains of industry and government have demonstrated clearly they don’t have a clue how to do it. However, to tell you the truth I hold out that the geneticists might be best equipped to deal with the matter, as only they might be able to affect the type of changes that can deal with the core of the problem :-)

Best,

Phil

Christine said...

Yes, it's silly, but economics is silly too. Humans should have better things to do and better ways to provide what they need. But perhaps they don't. Perhaps they *are* silly after all.

Christine said...

I hope it should be clear that I am not talking about production/consumption in their basic forms (since we are biological entities, it is clear that we need them to survive). Their driving mechanisms in societies can evidently be termed "economics".

I am talking about wealth and its transfer, the balance of power involved, economic imperialisms and virtual finance manipulations. All these should be completely eliminated in my (silly) opinion. All humans should have equal opportunities and "economics" in that latter sense is just individualistic movements that have no commitment to improve our societies towards equal opportunity and a better world. That's why I think its silly.

Bee said...

Hi Christine,

I think there are several issues we are discussing here at once. First, there is the question what economics is good for. Second, there is scientific question of how to address it. Third, there is the question that we started from, what physics has to do with it.

As far as I am concerned, our economy is a natural part of our societies. You can't 'eliminate' it any more than you can 'eliminate' the blood circulation of a mammal. It is essential to distributing goods and resources.

I am thus not sure what you meant to express with that statement. You can certainly discuss how an economy should operate, and in such a sense 'eliminate' certain of its features. For example, you might want to eliminate private property, or certain financial instruments, or even money itself. This however is a question of 'how' not of 'if,' it changes the procedures of our economy, not the fact of its existence. I could even imagine that some time in the future we might have resources so plenty that a lot of our distribution issues will just no longer exist, but we are far away from this. Even that however wouldn't eliminate our economy. It would just render a lot of our present worries unnecessary.

As I have expressed in many writings, I believe that the question which organization of our social, political and economic systems is most beneficial for our well-being, and most suitable to reaching our goals, can to some extend be scientifically addressed. That being in contrast to proceeding by a trial an error process. One has to realize that in the last 50 years or so, many people have spend a lot of effort into 'proofing' and (more importantly) popularizing the idea that a market is better the less it is regulated. Many people have put forward arguments why this is a faulty conclusion. Since it is one that has dominated global economics for quite a long time this is certainly a question that should be settled rather sooner than later, and it is to a big part an academic argument that shouldn't be biased by personal interests in a certain outcome.

As far as the interdisciplinary aspect is concerned, though social scientists hate to hear it, I think that presently the flux of knowledge between the natural and the social sciences is pretty much one way. The reason being simply that the scientific revolution has taken place in the natural sciences already some centuries earlier. If you don't like to call that interdisciplinary, maybe call it otherwise, I don't care very much. If you take any of the natural, and any of the social science, the pair that is closest together will be physics and economics. From the social sciences, it is economics whose mathematical description is the best developed. The development and applications of suitable models however seems to me somewhat wanting. We all know how easy it is to get lost in mathematical beauty and end up describing an 'elegant' but completely unrealistic world. These are problems physicists are well aware of, and I believe that for that reason on the side of model building we can be quite useful.

Best,

B.

Bee said...

Hi again Christine,

Sorry I just only read your second comment.

I am talking about wealth and its transfer, the balance of power involved, economic imperialisms and virtual finance manipulations. All these should be completely eliminated in my (silly) opinion.While I wouldn't call it silly, I would want to emphasize that there are good reasons for our financial system to be there and to be organized as it is. Any change to a system that has contributed to our well-being to such an extend should be carefully considered. You are of course entitled to have your own opinion, but I don't think that an 'elimination' would be for our better. Either way, as I mentioned above this is a question that can to quite some extend be scientifically addressed. The part that can't be scientifically addressed is one of political opinion, and as I have pointed out extensively elsewhere this is why I believe one can't adequately describe an economy without taking into account the political decision making process. Best,

B.

Bee said...

Hmm, there is something funny with the linebreaks in the comment feature. This has happened now several times that linebreaks after a quote I used just didn't go through. Anybody else noticed the same problem?

Christine said...

Any change to a system that has contributed to our well-being to such an extend should be carefully considered.Hi Bee,

Whom do you refer to when you say "our"? We went through this somewhat, some time before. Consider that you are talking about a group of countries that has been in fact benefited from the system in question. Then came the current "economic crisis", bringing so much anxieties to those countries (and to the other rest, who depend on the former ones).

So I know you are talking about developed countries whose wealth came in part from the exploration of others to start off. It's energy conservation: you cannot gain more if you do not remove your part at the expense of something else.

You visited Brazil recently, I'm certain you saw an ocean of poverty in Rio. What do you think about it? And Brazil is not that bad, as you may have noticed it. There is Africa out there. Will those countries enter in the "scientific formulation of economics"?

Anyway, bad luck for Brazil -- just when we were beginning to have a nice "economic growth rate" the crisis came.

It appears that when you talk about poverty, it mainly focuses individual porverty. I am talking about equal opportunities since birth. There are many basic issues at hand.

I do not see how much one can discuss such issues "scientifically", when it does involve balance of power at the very basis.

But I told you: never mind. I sincerely hope you find the conference beneficial and constructive, and I am certain that you will share it on your blog. I look forward to it.

Meanwhile, I'll get back to my stuff... :)

Best,
Christine

Bee said...

Hi Christine,

Yes, I believe we have had a similar discussion already previously, but now as then I don't understand what your anger is aimed at. I am well aware that many countries on this planet are less fortunate than the one I was born in, the one I presently live in, or the one I will be moving to. I also believe that these gaps are, though not completely avoidable, improvable, yet not with a global economy that continues to run on the premises it has been run since after WWII or so. That is exactly the reason why I am saying a more scientific and less biased approach is needed. One in which opinions are not weighted by the money that can be raised to support them, or the power that can be exerted by those already fortunate enough to have that power in the first place.

And while it is of course true that wealth of the developed nations has benefited from exploiting less developed nations, you fail to acknowledge that the overall progress this has enabled in many if not not most cases also benefited the less developed nations.

"So I know you are talking about developed countries whose wealth came in part from the exploration of others to start off. It's energy conservation:"

Unless you are talking about direct slavery, this is just bluntly wrong. The whole idea of redistributing resources is to put them to a most efficient use, and that actually works quite well. In that process you increase the total output, it is not conserved, that's the idea that has allowed capitalism to be so enormously successful. Not because it has just moved some goods from here to there, but because in that process these goods were used more efficiently, freeing capital for further developments and subsequent following improvements etc.

Many of the reasons why developing nations have not benefited as much as they should have has less to do with global economy, as more with corruption and dysfunctional social, political and economic systems on the national level. As a result, you'll find a lot of nations with some few rich people getting fat, while the majority of the population is still fighting not to starve. That's a problem for which there are no panaceas and that you can't solve with changes to the global economic system (and though the IMF certainly has tried, I actually think no nation should tell another nation how to do its business).

The problem you can address however is that increasing output might not be everything you want, you might in addition want to make sure the system works towards decreasing the gap between the rich and the poor or other goals that you cherish. That it doesn't do automatically, as we know now, but for many decades you'd have found proponents of globalization advocating (and still advocating) this would happen. Christine, you are preaching to the choir. It just seems that my approach to the problem is quite different from yours. Instead of doing away with a system you believe is faulty, I am trying to find out where it worked well and where it failed, and how we can understand and improve it.

What did I see when I was in Brazil: I saw a country with a vast potential, being lead by an - as far as I can tell - inspired government that has understood exactly that a free market alone is not going to solve their problems. If only more nations would understand that, it is about time we realize a social market economy on a global scale. I think the world has had more than enough of anarcho-capitalism.

Best,

B.

Borja said...

Rise Against - Black Masks & Gasoline

Borja said...

When you have the results of the conference please, post them in the blog. It's going to be very interesting. http://twitter.com/ESS_BILBAO

Christine said...

Bee,

I have no anger aimed at someone/something (and certainly not at you), I am not anger at all, though it may appear from my unelaborate writtings. I should try to improve on that.

Yes, I was commenting on several different things: historical contexts, "economics" and mainly the anarcho-capitalism system that you mention, and little general things on "how to improve the world" and so on. Too simplified and messy, sorry about that.

Yes, we agree on several issues of course. But certainly with fundamentally different approaches. You are trying to follow a rational path, trying to understand the system in order to improve it, and I praise such efforts; please continue, and good luck in your attempts. I, on the other hand, see the system as a big failure at its very basis, and a big waste of time to try to understand rationally its peculiar underlying workings. In my case, I'd say I have no approach at all.

Anyway, I was specially referring to the financial market. I wonder whether a truthful advanced civilization would really need such a system. In my idealistic mind, I can make it go away very simply, of course. I know the world is not like this and changes take time. I hope that some time in the future we can finally do without it. I maintain that there is no way to improve such a system. It's just a chaos, founded in private interests and balance of power, and it will only evolve from this same basis, on and on.

The whole idea of redistributing resources is to put them to a most efficient useAgain, I think this is a relative statement. "Efficient use" is often relative to the interests of some, it would be great if it were for the interests of the whole, but I have the feeling it is not.

Brazil, for instance, is evidently inserted into a global financial market (and hence dependent on its fluctuations) at one side, and also subject to its own particular corruption problems and historical fortuities, at the other side. This is not different to many other countries. My desire to "eliminate" the former issue stems from the simple fact that it only deepens the latter problems instead of improving them, specially because those who really enrich from the former system are not directly or indirectly contributing those problems. Counter-examples here would alleviate my ignorance.

Concerning again Brazil, I think you have seen it at its best moments. Brazil is definitely not the same as it was some decades ago. Things have been improving in the exact sense that you mentioned, even though it is a large country with very unbalanced wealth distribution and many problems ahead, apart from possible impacts coming from the "global crisis". A curious situation.

Best,
Christine

Christine said...

I wrote:

"are not directly or indirectly contributing those problems."Should read:

"are not directly or indirectly contributing to solve those problems."

Jean-Philippe said...

Christine,

Juts a short reaction to your comment here:

Anyway, I was specially referring to the financial market. I wonder whether a truthful advanced civilization would really need such a system. In my idealistic mind, I can make it go away very simply, of course. I know the world is not like this and changes take time. I hope that some time in the future we can finally do without it. I maintain that there is no way to improve such a system. It's just a chaos, founded in private interests and balance of power, and it will only evolve from this same basis, on and on.The problem with the financial system is that it is taken as a good in itself, an end, and that no regulations should ever hampered it because it provides for the most desirable organization, this is the neoclassical point of view, and I agree with you to say it is absurd and dogmatic.

I am all for to reject this view, but the financial system is different from it, before rejecting it, one must look at what it really does.
One thing that it seems to do quite well is that it provides a fluidity of capital, and that might be a thing we wish to preserve, provided this fluidity is used to indeed redistribute wealth in order to provide more opportunities to more people.
The neoclassical theory assumes that capital goes naturally where it is most needed and best used, again, this is an entirely gratuitous assumption, with no ground in reality, and I think it is false.

The fluidity of capital provides us with a means to distribute wealth in a socially aware way, but this must be done by well-thought policy, not by some metaphysical "invisible hand".

On the other hand, to come back to the metaphor of the blood system already used in this discussion; fluidity has some adverse consequences that must be carefully weighed in. Too much fluidity may entail some problem in case of a bleeding, and we are now in a bleeding phase of the financial system where fluidity is adding to the loss of wealth every day (4.1 trillion of global loss as the last update). Here also, regulations about financial instruments liable to create such bleeding must be enforced.

There are many other aspects about the necessary regulations, but I guess you got my point. Hope it helps to clarify a few things.

Cheers

JP

Arun said...

Somebody built a car without brakes. After it crashed several times, someone else said - We should not have cars.

Yet someone else built a car, and used it to run over many people. Someone else said - We should not have cars.

After all, we have our feet and they are never used to kick or to step on someone else's toes. Why do we need cars?

Tkk said...

Andrei - After reading about 10 lines of your post, I conclude that all you offer is un-intelligent anger. No wonder you are not invited to the conference.

Phil - Right on. Let real scientists give it a crack.

There appears to be some mixing up between economics and financial products. Economics is dismally scientific because it contains human psychology, politics, and is all about predicting the future. It is highly sensitive to Black Swan eruptions. But derivative financial products, the kind physicists and math whiz cooked up with so much unscientific fun for over a decade (not to mention the fat salary), is very much THE cause of the current crisis. Either we ban these products, or we better damn well fix them. This time with real, verifiable science. Let's not play with fire again.

I know Roubini writings well, and read Talab's Black Swan. I am pleased they have chosen to contribute in this conference. Both are way out-of-the-box thinkers, and both have been devastatingly right when 99.99% of the other players were wrong. And yes, both are scientists of the first order.

This conference is PI playing a leadership role. My congratulations to the organizers.

Phil Warnell said...

Hi Bee,

I have been following with interest your discussion with Christine. Christine in suggesting tearing it all down gives one pause to consider what exactly that might represent to be. In my mind one of the greatest burdens on any system is the numbers that are required to administrate/oversee it as opposed to the numbers that directly contribute to it. You might say that is to ask how many bean distributors, bean counters and bean controllers are required in relation to the number of bean producers and bean consumers? That is to ask simply how productive and efficient is the first group?

For me between all the different levels of taxation, regulation and administration of resource it’s a fair question to ask how much of this is truly necessary and how much of it is simply self serving and becoming more and more taxing on the system as a whole? It is then fair to ask if what is to be dealt with in such discussions that PI is sponsoring will address this side of the problem?

If all it comes down to is how to add more layers and complexity between the bean producers and bean consumers in the end it won’t amount to much. However, if it addresses how these can be made more efficient without negating, yet rather increasing the required transparency and fairness then it actually might count for something.

Best,

Phil

Christine said...

Arun wrote...

Somebody built a car without brakes. After it crashed several times, someone else said - We should not have cars.

Yet someone else built a car, and used it to run over many people. Someone else said - We should not have cars.

After all, we have our feet and they are never used to kick or to step on someone else's toes. Why do we need cars?
...


Somebody devised nazism without killing. After it had not convinced many people, someone else said - We should not have nazism.

Yet someone else devised a form of nazism which killed many people. Someone else said - We should not have nazism.

After all, we have our senses of humanity, maturity and personal growth, and they were never used to eliminate someone else's lives. Why do we need nazism?

...

I am sorry to have gone that far, but such reasonings lead nowhere. It is obvious that if a system is interesting, useful, promissing, and can be improved, so it should be improved. Otherwise, improvement by improvement on a failed system will lead nowhere (or perhaps *somewhere*, not necessarily that one intended in the first place).

It is clear, however, that what one accepts as interesting, useful and promissing is not necessarily a universal agreement. One might find nazism an interesting, useful and promissing system, which can be improved. This is evidently an extreme example, which fortunately involves an agreement of a tiny minority of people today. It is therefore an easy example in which a large majority of people in the world today regard as an unacceptable, a system that cannot be improved but must be eliminated, so we are done with it now (and it was not that easy).

I only claim that the speculative financial market, the virtual economics, the anarcho-capitalism and all derivations compose a failed system from their very basis (and for those who do not read posts carefully, I am *not* equating the financial market with nazism!). One may not agree upon my statement; indeed it is quite possible that a majority of people may not agree with my statement at all. At this level, everyone is entitled to have an opinion. On the other hand, one could try to prove my statement right or wrong. This could be an interesting exercise to begin with. Or maybe one may find that all that is so obvious that the exercise is not necessary at all. Never mind.

Bee said...

Hi Christine,

Thanks for the clarification. To be honest, I don't understand why you see the system as a big failure. Without a financial system, nobody could lend money to struggling countries or people who need them. No investment would ever allow poorer countries to get out of poverty, there would be no credits, and no micro-credits either.

"I [...] see the system as a big failure at its very basis, and a big waste of time to try to understand rationally its peculiar underlying workings. [...] I was specially referring to the financial market. I wonder whether a truthful advanced civilization would really need such a system"

The financial system is mostly a means to make promises, to track the fulfillment of these promises, to reward those who do well, and to punish those who don't. It's really all about accounting and keeping records, but it's these promises that allow people who don't have any capital to make a start with nothing but an idea, nothing but their dedication, nothing but their drive to allow their children to lead a better life. While I can imagine a world without a financial system, it would mean a rapid and serious decline in our (and yes with 'our' I mean our all) circumstances of living. But that wouldn't happen, because people would just continue to borrow and lend anyway. This system hasn't been used for so long because it's a big drain on mankind, but because it has been a central ingredient to a rather stunning progress that has taken place in, say, the last two centuries.

Frankly I believe if you think about it, you will find that our opinions are closer than you might think, because I have the impression what you think is a 'failure' is not the financial system per se, but certain of its aspects. And I would agree on this. See also Jean's reply above. It has been often said, and it is true, that the financial system has degenerated into a gambling system which benefits predominatly the rich, whereas the rest has to suffer from the side-effects, and all of that is being justified by the (allegedly scientific) argument that this maximizes social welfare.

"Again, I think this is a relative statement. "Efficient use" is often relative to the interests of some, it would be great if it were for the interests of the whole, but I have the feeling it is not."

If you open a random textbook on economics you will find that both social welfare and efficiency are well-defined notions. The point is, you don't need to argue with feelings you have or don't have, but it is indeed a scientific question. I hope this clarifies my interest in the topic somewhat.

Best,

B.

Giotis said...

It is well know that the crisis has a simple route which is an intrinsic defect of capitalism. After a certain time period of rapid growth, a saturation point is reached. The world produces so much wealth that it cannot be absorbed by the people. In order this wealth to be absorbed it is necessary to lead people to over consumption. A simple way to do that without lowering the prices or increase the salaries is to give easy loans to everybody. This way you can even gain from the interests. But the loans are not free money and they have to be paid back eventually plus the interests. Something that led to the current crisis.

Another way is to expand your consumers' base to countries under development like China or India by investing in those countries and thus by increasing their income. This way you acquire cheap labour force too.

A third possibility is to trigger a war. This way you destroy the production facilities and you start all over again from zero until of course the next saturation point. WWII is a typical example according to many i.e. the economic crisis of the 1930s led to WWII.

It is very characteristic that Paul Krugman (2008 Nobel prize in economics and one of the few people that foretold the crisis) in a recent interview said that unless they found a way to export to planet Mars he doesn't see an easy way out of this crisis.

Currently they still have faith to countries like China, India or Brazil. If these countries keep their growth rate and consume more and more there is still hope for the system to balance.

Christine said...

people would just continue to borrow and lend anyway...

It is evident that there are basic mechanisms that cannot be changed, because in principle they are part of us being social creatures to begin with. Clearly, if you go back in the system to its very foundations, it is irreducible to that simple exchange dynamics, and you have that kind of "pristine economics". This is the basis which any system should be faithful to. I never referred to an "elimination" of that basis, but, on the contrary, I claimed that any system at whatever scale which is not a faithful realization of that basis is a failure by construction.

I think that some very literal interpretation was made on what I wrote previously.

...
I have the impression what you think is a 'failure' is not the financial system per se, but certain of its aspects....

I am positively sure that what we have now is an extremely complex system built and evolved from a large number of unconsolidated factors that will necessarily render the system to a collapse and it is a failure by construction. Yes, I strongly believe that any improvements on such system will not be able to simplify it, but rather result in the construction of a more and more complex structure. This is perhaps another basic subject matter to be discussed at that conference: show that any improvements on the current system will simplify it and make it faithful to its original goal. I claim that it is an impossibility.

It is easy to use the wastebasket when writing a note, and evidently one cannot do this with economics. What I have claimed before was, in other words, that the system is a failure to what it was devised to do (an outgrowth of "the pristine economics" mentioned above), exactly because it is not committed to its basics foundations. So ideallistically one would like to think outside the box and largely use the wastebasket. This is my clarification of the word "eliminate".

I need to stop here. I will follow the discussions later, but I think i have nothing more useful to add.

Best,
Christine

Bee said...

Hi Christine,

I think I am probably less in favor of reducing our system to the pristine basics you are talking about. I do believe that most of the achievements of our political, economical and also financial systems are positive, for the better, and that back to the basics would be simpler, yes, but it would also reduce our (and yes with 'our' I mean our all) standard of living. And I actually cherish the 21st century for the possibilities it offers. I am afraid I am not very romantic about living in the middle ages. That is not to say one should ignore and accept the developments that are not positive. Life is really all about constant improvement.

You are of course right that the system has gotten far too complex and that this is part of the problem if not the main problem. I also think it is right what you say that it will break down sooner or later (the current crisis is not a breakdown, it isn't anywhere near one). There is a whole theory behind how the increase of complexity leads to a decrease of resilience and eventually breakdown to a simpler state (one finds this in ecosystems too). That is pretty much part of the natural order and bound to happen. The question is how prepared will we be to buffer the fall, how prepared we will be to rebuild.

Either way, I guess my approach is just what I think is pragmatic. The world is as it is, and I'm not going to convince anybody to rebuild the financial system from scratch. One has to work with what is there, and find ways to improve it. In contrast to you, I do think it is possible to simplify, by a process you could call self-induced constructive breakdown. It's just one of the valleys we have to go through to reach a higher maximum. And it's a path you can only take if the pain is really high enough so people are willing to try it.

Best,

B.

Andrei Kirilyuk said...

Of course, you are right, Christine, and they are wrong, all those apologetic and self-interested “scientists”, “economists” and “simple consumers”. Yes, that is the point, you see, that “small” subjective detail: they are first of all consumers of those “unfairly distributed” resources, but unconditionally and hugely in their favour, in the current system! So they find it pertinent, even with that terrible catastrophe described as such even by the strongest system players and economists (some cited here), to “take it easy”, remain “optimistic” and especially try not to change the system essentially, the one that feeds them so well, even today. In my “developing” (and recently “promising”, high-growth) country producing space crafts and nuclear power stations a senior scientist like me cannot even survive (just eat properly) any more because of huge consumer price growth, with the same and dropping (miserable) salary. I do hope that it's still somewhat better for you in Brasilia, but your discussion shows that you too can feel severe and growing problems around you directly, “by your skin”.

Now, the followers of the “great Einstein”, let's make a small “thought experiment” to clarify the situation. Let's put the two of us, you and me, in their position, me at a senior position in one of their “advanced” study institutes (with a dozen of other “related” highly paid jobs) and your at another “top” lab position (a Harvard professor would be OK?), and with the same crisis outside and our scientific business (for it's only business there), we are organising, of course, a topical “interdisciplinary” conference on “physics and economy”, with our key participation, generous remuneration, funds allocated and our regular profits having greatly increased anyway due to the crisis, in the country that has uniquely created the crisis (without any threat of job loss for us and with consumer prices noticeably dropping, still increasing our already king's purchase power), as it happens to be the case in the USA today due to “anti-crisis measures” in science of Obama's administration (several-times increase of science budgets, with the same, already privileged scientists, always without any solution to any problem). At that point we obtain opinions of some poor third-world colleagues, say Bee and Jean-Philippe and Tkk (oh, they always have such funny names in those countries, you know!), who having zero purchase power and hardly surviving in their disappearing world tend to cry and propose some “radical” and obviously crazy solutions like “elimination” of our great economy or even denouncing our obviously great, so generously sponsored conference as useless talks by rich parasites, can you imagine that?! So what shall we answer them, in that our position? That they are too radical, of course, that they should be more optimistic, that “people would just continue to borrow and lend anyway”, that everything will anyway and should basically continue in the same way (why changing it, indeed, with those unconditional advantages for us?!), except maybe for some infinitesimal efficiency growth (always in our favour, of course) that we can maybe elaborate as a result of our “modest” but immodestly supported efforts (or maybe not, doesn't matter anyway) and finally, if they insist, we just ask them, politely, to shut up and take their hands off our “honest” profits. Fortunately for us in this real world, it's only a bad dream (for us), we are together with the suffering humanity, in the same basket. And “radical” (alive), because of that, fortunately. Still human, such a redundant quality... (like in Total Recall, “is you ... still you?” :) ).

When you said something about “conservation law” for profits in the world, oh, Christine, dear, you should not say them so openly that they have stolen our money (although you're damn right, baby)! :) Because as far as I could understand you (and they understood it too, to be sure!), it's just them, our happy scientific “colleagues” from North-American paradise and other “rich” countries that directly or indirectly obtain much additional and unconditional wealth at our expense, my poor friend. That's life, as some like to say in such situations. It's true, Bee, that yet a decade ago, before the last “globalisation” establishment, the situation was different from today and each country was more responsible itself for its well-being and also got some “international” help and investments from “rich” counterparts. But the game has dramatically changed today: economically, the world is a single, directly connected “manifold” now and given the long-standing international character of scientific activity, any direct comparison at the world scale and “conservation law” is absolutely justified, especially in science. Why any “Harvard” label should be more important than the explicitly proposed, clearly visible and so easily accessible problem-solving results, especially after all those “triumphant” failures and falls of all your “best-place” doctrines and predictions and the related clearly visible “end”, now of the world itself, rather than only science ? But all your formal labels continue to be infinitely much more important than results, just because it's your labels, the irreducible and unique source of your unconditional (and, sorry, unmerited) profits and related “high positions”, the only purpose of today's scientific activity, with practically absent genuine (problem-solving) results (I said “absent problem solutions and present nice profits”, Tkk, for those who cannot read).

So, Christine, following your appeal, I can say that I can indeed properly specify and rigorously (mathematically) prove your ideas on the necessary “radical” change, where in the end one obtains indeed a much more advanced, intrinsically sustainable and truly, creatively “democratic” world order (where today's unitary democracy looks relatively worse than classical fascism with respect to today's manipulated democracy) and indeed quite another way of material production and exchange that is real as such but so different from today's hierarchy of frauds that it cannot be called “economy”, let alone “finance”, in any modern meaning of the word. I am ready, of course, to specify all the necessary details and further elaborate them, where necessary, together with you and other truly interested people, scientists and beyond (you can easily find the necessary starting points in my links), but this kind of work (necessarily containing rather special details) does need a closer interaction than internet exchange alone. So why not to organise a conference, let's say something interdisciplinary between physics and economy, but now with that well-specified purpose to provide as a result a clearly specified, mathematically rigorous and causally complete, non-“model” solution to a problem opening a whole new, prosperous way to the whole poor humanity lurking now gloomily in its dark impasses? Oh, dear, you can't find the necessary financial support for that? Why not, Christine, when this solution is so much important now, really, and in addition we have a common motivation and that wonderful coherence between our attitudes? It's the same for me, unfortunately, for us all: money not in project. Why is it so unfortunately happens in this world that people that have solutions have no (access to) money and those that have practically unlimited money gathered eventually from the whole world, have no solutions and respectively are afraid of solutions by others? This is very unfortunate for this world, maybe it's even its worst “economic” problem... Anyway, I hope it can make you happy already to know that a very serious support for your ideas and attitude does exist and its results can even exceed your best expectations. So we shall dream about our better world, while they will continue to destroy this real one and kill any hope of its transformation. That's life, as they like to say always because there is nothing else than this kind of “life”, in their world.

However, one really simple thing could be really useful and efficient from the part of empty conference organisers and pretentious lovers of humanity of all flavours. While saving humanity is far beyond your possibilities, you could try to save those who can save humanity and to begin with, why not to start with a nice, feasible task to help, financially, to “developing”-world scientists of “international” scale (speaking and working in English) that are really in a position of “physical” disappearance today, one country after another, only because of your crisis, friends? Neither their own efforts, nor any IMF billions for their countries can solve the problem, but well-directed, special help can. It can be efficient because there are actually very few such scientists still working in those countries, maybe hundreds or at most thousands, all extensions including, in the whole world (and very few “interdisciplinary” ones, but let it bleed). It's like what George Soros, the ruthless market dealer once did for all (indeed many) scientists from the whole fallen Soviet Union: he just spent a whole billion of his own money for their unconditional life support until things there got better. Because he is clever enough to understand what seems rather evident, especially today: those “interdisciplinary studies” and other “complicated” measures cannot really be “economically efficient” in a world like this, and only simple, direct material help, from one pocket to another, can. Nice dreams to everybody.

Christine said...

I am probably less in favor of reducing our system to the pristine basicsI did not mean that. What I meant was that whatever the system, it must be *faithful* to those pristine basics. The present one is not. It is a failure in that regard.

And I do not wish to return to the middle ages, evidently.

Only a clean and faithful system, that is all. I don't think the present one can be improved towards that aim, nor there is an efficient and single method to do this. Its an internal change, an internal revision, it is all about what makes us more human, more evolved and more free.

I'm not going to convince anybody to rebuild the financial system from scratch.You cannot. No society can. I did not offer such method to proceed. It is a very bad situation we are in. Only internal changes would bring us to a better system. That is why I said "never mind". I have warned you...

Bee said...

Hi Giotis,

While I agree on the intrinsic defect of capitalism, you are missing one way out, that is investment into sectors that increase the standard of living by means other than increasing consumption of goods. This doesn't happen however because these are long-term or large-scale changes that have too little incentives on the individual level. There are the occasional philanthropists who understand that investing money into producing more stuff nobody needs isn't going to change the world, and who understand the importance of social responsibility. But other than that people invest where they will get rich soon - after all, that's what they are told is what is the right thing to do to maximize well-being lead by an invisible hand - thereby just accelerating the pointless run in the hamster wheel.

To be very clear here, yes I do mean that a civilization who has sufficient resources to produce whatever products people can possibly sensibly need, the obvious thing to do is not to convince people they should buy more stuff they will never use and who aren't going to improve their standard of living anyway, but to invest into culture, art, science, to foster social networks, communities, education, and everything that improves human well-being but can't be bought in a shop. Capitalism has a blind spot in this regard, which is one of the reasons why I believe a social market economy is the logical conclusion to which any enlightened society should come. Best,

B.

Arun said...

Or maybe one may find that all that is so obvious that the exercise is not necessary at all.Yes.

The real complexity here is I think simply stated as follows:

Any financial transaction involves real assets and imaginary assets. E.g., if someone gives you a loan, the loan is real, the payments you are going to make are in the future, and hence, currently imaginary.

Without regulations to keep an upper bound on the ratio of imaginary to real assets, the system is unstable.

The complexity comes in what should be counted as real. E.g., when Goldman Sachs insured a CDO with A.I.G., a firm with a AAA rating, Goldman Sachs then took its CDO to be almost entirely a real asset. The problem then was that unlike with normal insurance, A.I.G. was not required to keep a real asset reserve.

As with any simplification, the above is not entirely accurate. But the wringing of hands over complexity is, I think, unworthy of physicists who are used to conquering complexity.

To put it another way, the financial problem is no more complex than - machines with levers with one arm very long compared to the other are unstable to small perturbations on the load on the long arm.

The political problem of how to fix the system is much more complex, but that is because financial and political power lies with precisely those people who are (relatively) disadvantaged by putting in the system fixes.

---
To put it yet another way, the human body is incomparably complex (even compared to the financial world) and yet we can treat it and help it heal. And it still obeys the laws of thermodynamics.

Christine said...

Andrei:

Please, read my last comment, specially these words: "Its an internal change, an internal revision, it is all about what makes us more human, more evolved and more free."

Just take it easy, and let me state it clearly that I am not interested at all in being engaged into any movement towards "changing radically the system". This goes against my philosophy, expressed in the words above.

Christine

Christine said...

Arun:

I understand your point. But please read my comment above in which I mention that "whatever the system, it must be *faithful* to those pristine basics". Since I don't believe the present one is, one is then trying to fix a system that is a failure by construction. You may be able to prove that such system can be mathematically modelled or understood under general statistical principles, and even changed "for the better" (whatever this means). I never stated that such an understanding/modelling was an impossibility. But rather, to prove that one can make the present system faithful to its original purposes (the "pristine economics" mentioned at another comment). This is a quite difficult exercise, IMO.

Giotis said...

Of course I agree with what you are proposing Bee but how you are going to achieve this social market economy? This is a peculiar hybrid. Do you have in mind maybe the welfare state of the Scandinavian countries? What you can do I guess is to tax heavily the capital profits and invest the money to social welfare, education, arts and so on. But then (and since we are living in a global economy) your domestic or foreign capital will probably move to a different place to avoid the taxes. Nobody will invest in your country.

Andrei Kirilyuk said...

Christine, any “internal” change cannot happen within itself and even “theoretical” interaction with the system (reality) is not enough: you can only change by changing (essentially) the world and the reverse. It's just inseparable entanglement and change can never happen otherwise. Also, you seem to “evolve in real time” of your comments here. That's good, of course, but I prefer that part of your interventions in this post where you did speak about a strong change, even “elimination” of modern economical order. After that you seem to have evolved towards desirable “return” to its “pristine” state. Certainly, young, quickly developing capitalism is a cruel but healthy thing often based on true values terribly missing today. But one can never return back, in any sense, because time is irreversible (you should know that as an expert in the subject). You cannot really “get rid” of today's defects, they are here “forever”. Until (inevitable) disappearance that is of the present order of things. And if it can be replaced by something essentially different, it is only in that way that “old good values” can reappear, in their new form, at the emerging superior level (with its “internally” changed people, of course!). Such are the laws of development, absolutely universal ones: only forward and never look back!

Christine said...

To make it as clear as possible, to my understanding:

- Bee is trying to understand the current economic system, in order to find ways to improve it. She has a pragmatic approach, shows a desire to activelly participate in possible changes, and apparently expects to see such changes occuring in her time span. What is "improvement" is a question that she is open for debate.

- Christine regards the current economic system as a failure because she sees it as not being faithful to its original goals. She does not think that it is necessary to reduce the current system to a "pristine economics" and live at that stage, but positively that any economic system should be 100% faithful to such a "pristine economics". Idealistically, she regards the elimination of the current system the optimal solution, but acknowledges that such a task would require an internal change, taking several generations, if at all. She does not offer any methods or approaches towards that aim, nor is actively pursuing it, except her own personal pursuits.

One can check whether my ideas are "evolving real time" just by comparing my previous comments with the summary above. Elaboration is something quite different from change.

Christine said...

One more clarification to my previous comments:

What I call "faithful system" is *not* a reduced (primitive) system, but a *reducible* one: it must reflect and implement faithfully all original goals.

The current economic system is not a faithful system because it is not reducible to the original economic goals.

Christine said...

And a pictorial example.

Bee said...

Hi Giotis,

While I personally believe the Scandinavian countries to be one of the best places on Earth to live for exactly that reason, it is far from my intention to expect that every country be similar, simply because I know that not everybody shares my preferences. What I want is simply for the option to be there, so citizens can make a choice themselves instead of being told what they are supposed to accept as the "scientifically" proven best solution. One just needs to realize that the free market alone doesn't maximize social welfare and that it has to be completed by a democratic system in order to improve everybody's well-being. There are many means how to do that, it doesn't necessarily have to be taxation. In fact, a strengthening of the democratic principles to begin with would probably make a big difference already.

Nobody will invest in your country. Well, Germany has a social market democracy (though parties differ in their interpretation of the details) since WWII and they have been and are doing economically very well. Likewise, the Scandinavian countries as well as many other European countries are working well with such a system (the expression though is typically German and not very widely used as I had to notice). While I don't know very much about Brazilian politics, in my impression they pretty much have a social market democracy too, and it seems their country is flourishing with it. Clearly, the advantages outweigh the disadvantages. If you look at the statistics, you will find that Europeans work less (in time per week) but achieve pretty much the same (in terms of GDP) as the Americans (many of whom seem to do nothing but working without ever getting anywhere), plus they have a better social system. The stories about capital fleeing elsewhere are in the vast majority scary stories meant to secure the privileges of the wealthy. Investors know very well the value of quality and stability. But you are of course right that in a time of globalization such a system would need to be backed up globally too. The obvious way for this to happen is via the labor unions. It would mean however that more countries realize the advantages.

However, as much as I am convinced that a social market democracy is the system of the future, at the present stage the system is too slow and has too much inertia to perform well in its task of balancing the economic system. The current crisis is an unfortunate example of what happens when politics is limping behind and only when things go really wrong start people finally looking into matters.

Best,

B.

Bee said...

Sorry, the translation of "Soziale Marktwirtschaft" should obviously have been Social Market Economy (not democracy, though its democratic aspect is of course essential).

Bee said...

Hi Christine,

Thanks for the clarification, it makes much more sense now what you are saying. Let me just add maybe that my problem with your argument is that I don't see any way to find out what such 'pristine economics' should be. I completely agree on being faithful to ones goals, but this requires the goals are known to begin with. It is a recurring theme on my blog that for a system to work well, upon all things you need to decide what you mean with 'well,' ie formulate the goals and these might very well change in time. Best,

B.

Phil Warnell said...

Hi Bee,


As in my previous comment I sympathize with Christine’s position that any real fix to the economy will have to involve tearing down much of it rather than dissecting and patching a flaw here and there. To simply think all that’s required is to look at ways to fix what we have is part to insist that there is largely nothing wrong with it to begin with. Currently in the U.S. congress support is rising to have a general inquiry into all that’s happened, as an attempt to discover what went wrong and what needs to be changed. Yet as they point out in this highlighted article, how can one expect a group who themselves were in a large part at fault be trusted to give a fair and unbiased assessment, let alone offer practical solution. As we all know this will only serve as a political white washing and pass the buck exercise, that in the end will solve little and more likely serve only to increase general mistrust and uncertainty, which would only aid to worsen the current situation.

They say if it isn’t broke don’t fix it, yet if it never did truly work properly perhaps all that can be done is to move on and construct something new that will work. The problem with that however is as Christine eludes it can never happen internally from the existing system and so to avoid a total collapse would seem almost impossible. I have to admit the argument appears sound and yet still hope there be found a way to transition that could avoid such a dire consequence. I think the first step is to honestly assess what the total elements that make up the economy actually are and admit that all lines and distinctions made thus far in this regard and practiced are totally false. Like in any deductive process things can only be sound if the premise true.

Best,

Phil

Bee said...

Hi Phil,

Well, as I said to Christine above, I do agree that there are limits to what patches on a broken system can achieve. I also said that one can expect it to break down completely. The same I unfortunately think is bound to happen with our political systems who are increasingly incapable of coping with the demands put on them. I do believe however that it makes a difference to be prepared for such a situation so we rebuild a better and stronger system. The key to this however is obviously to understand the present system, its advantages and disadvantages. I also think the present system can indeed be improved, and this is going to buy us time.

The problem is I am afraid that our present systems, neither the economic nor the political ones are able to cope well with pressure and increasing difficulties. And that pressure is likely to rise, for whether you believe climate change is manmade or not, we are facing dramatic changes within the next decades. What is going to happen then is what has happened numerous times throughout history: power will be centralized in the hands of a few just so anything gets done. This is a very dangerous situation. It can work, but it can also go completely wrong and it's a risk I think we should avoid. Best,

B.

Phil Warnell said...

Hi Bee,

“The problem is I am afraid that our present systems, neither the economic nor the political ones are able to cope well with pressure and increasing difficulties”

Yes I agree and more so first on the political side. Like you I hold little faith in trusting it all to a benevolent dictator(s), yet perhaps we need a true world council to be created, where the people not the politicians choose its leaders, which in my opinion is the way the U.N. should have been structured to begin with. So the problem of course is democracy is not the practice of the general world and so beginning this would entail only at first nations where this is the true practice, That would put powerful nations like China at the sidelines and have even Russia in a doubtful position.

Yes it is a pickle for sure, yet an attempt must be made and what has to be understood by all heads of government is that you can only lead from the front to have others trust so they will follow. The truth is fearful times require as remedy enlightened, committed, brave and sincere of purpose leaders and the question to ask is are there any at hand to be had?

Best,

Phil

Andrei Kirilyuk said...

Bee said: “While I personally believe the Scandinavian countries to be one of the best places on Earth to live for exactly that reason, it is far from my intention to expect that every country be similar, simply because I know that not everybody shares my preferences. What I want is simply for the option to be there, so citizens can make a choice themselves instead of being told what they are supposed to accept as the "scientifically" proven best solution.”

Sorry but it sounds as a cunning mixture of objective problem solution and the ultimate “citizens' right to decide” used to hide the actual absence of (objectively substantiated) solution. It's clear from the beginning that it's citizens that will finally decide everything, but you still consider that it's useful to propose some “scientifically” substantiated possible decisions or else why bother at all with all that “science and democracy” and “physics and economy” kind of activity? Just let citizens decide then, they normally learn all major existing possibilities already at school and in addition to their own experience, have easy access to so many professional presentations in so many good books and media about it. Or do you want just to add one more idle discussion to that already quite misleading chorus?

It seems evident that within any “scientific” kind of efforts in that direction one should better let citizens alone (at least at the beginning) and take care first about objective, rigorously elaborated versions of existing problem solution, without which any reference to what citizens might or might not decide becomes a smoke-screen game. And if one accepts that “science first” (obvious) attitude, then an interesting starting problem to deal with could be precisely that “Scandinavian miracle” (or way) analysis as a possible economically objective solution for many other countries, just in the spirit of “social market economy”. Citizens will see what they want, but your task is to show objectively and tell them that this solution exists (if it does!) and has such and such properties (and why) accessible for others. And even if there are some particular “subjective” moments within it, they could be properly included in the report (it could be something like “they just like to work much” (statistics), or “they eat much fish and therefore become economically efficient” (statistics), or that “the influence of regular sauna procedures, combined with vodka and beer, should not be under-estimated” (field research), etc.). So the question is whether that apparently most successful Scandinavian way can be a universal, sustainable solution to stick to (including, in addition, its good support for science and women and especially women in science - all just as you like!), at least in that “social market economy” class of solutions, or whether, on the contrary, it's just another illusion similar to, for example, the major “American way” (often known as ultimately “liberal” solution) that seemed to be very successful for a long enough time, but not now any more. And this is what such “interdisciplinary but scientific” analysis of “practical life” problems could actually serve to: to indicate citizens what they could try (and with which objectively probable result) and what they shouldn't try because it's just another dead end. Because if they are left only with their usual “wondering in the dark” before touching “another brick in the Wall” (poor unaware citizens!), then thank you very much, but this is what they have already, without any “science”!

Come on, Bee and others, this small Scandinavian case is just a good easy task for starters, you'll easily crack it without complications, with your widely known interdisciplinary talents. Because otherwise, how to have a minimum hope that you can solve or at least clarify those other, much, much more complicated, real problems humanity faces today and certainly cannot solve them any more by its amateur “trial-and-error” experimentation?

Help us, scientists, that's why we're supporting and protecting you and your activity so well, even in our hardest times, and it's now when our problems become particularly pressing and definitely exceed our non-professional abilities that we badly need real, professionally efficient and concretely useful help from you. Help, please, don't leave us alone with all these crises...

Andrei Kirilyuk said...

Bee said: “What is going to happen then is what has happened numerous times throughout history: power will be centralized in the hands of a few just so anything gets done. This is a very dangerous situation. It can work, but it can also go completely wrong and it's a risk I think we should avoid.”

To avoid we agree, but precisely how? We all know well what we are afraid of, but we, simple citizens don't know how to avoid it efficiently. Scientists, pl-e-a-se, h-e-e-lp...

Arun said...

The whole point of democracy is the peaceful abdication of power. Otherwise you can hope for that one in a thousand year phenomenon, the Philosopher King.

If you take the economic system to have been fundamentally broken pre-Great Depression and basically sound post-FDR, then it happened once, it can happen again.

Phil Warnell said...

Hi Andrei,

You essentially give science a larger importance and role then it actually has in the understanding and shaping of our world. That is science is the practice that seeks to discover how things work, not so much determine what they should be, only at best suggest a mechanism for what it is we want to have work. Our society and its economy are not things that are to be discovered, yet rather created and that first requires to define purpose for which science is as it stands is almost totally useless.

Best,

Phil

Andrei Kirilyuk said...

Phil said: “Our society and its economy are not things that are to be discovered, yet rather created and that first requires to define purpose for which science is as it stands is almost totally useless.”

Isn't it the same as to say that today, contrary to what was before, we badly need another kind of science, with explicitly proven ability to solve these new, essentially harder problems we're forced to deal with? Or do you really hope that we shall wait and digest their much-more-than-usual frauds they call “democracy” and then “somehow” things will get better, just as they did “once” before?

On the other hand, when you say “the truth is fearful times require as remedy enlightened, committed, brave and sincere of purpose leaders and the question to ask is are there any at hand to be had?”, you're thinking or hoping for whom, those “democratic” political clowns (manipulated not by the “people”, of course)?! Their results are well-known (aren't we discussing just them?) and you don't have essentially different ones, except “strong-hand” extremists, but this is what you would like to avoid, if I understand you properly...

Bee said...

Andrei:

"It's clear from the beginning that it's citizens that will finally decide everything, but you still consider that it's useful to propose some “scientifically” substantiated possible decisions or else why bother at all with all that “science and democracy” and “physics and economy” kind of activity? "

I do indeed think that the decisions ought to be made by the people. That's what democracy is all about. What I have said - here and numerous times before - is that you can't prove anything is a 'best' solution without figuring out what 'best' is to begin with. You thus need a system to find out what people consider the 'best' state. The first question is thus, how do you set up a system that extracts this opinion in an efficient and accurate way. Once you have identified that, the question is how do you achieve that 'best' state. These both are questions that can to some extend (though not completely) be scientifically addressed, what could lead to a dramatic improvement.

You fail to see that people have no interest in pursuing strategies that they have reason (and scientific arguments are a reason) to think will not get them where they want. The reason why neo-liberalism, laisse-faire and deregulation are so popular is that people think it is the best solution to maximize social welfare, under all circumstances. It is a widely spread misperception, and I think science can contribute to clarifying this point. What I am saying is not that deregulation is bad, I am saying people ought to decide what they think is good and what is bad first. Best,

B.

Bee said...

Hi Phil,

"perhaps we need a true world council to be created, where the people not the politicians choose its leaders"

While I do believe that democracy is essential and I am certain we need a global political system, I think one has to be aware of the practical limitations. The systems that we are using now just simply won't be functional on a global scale. Already at the present state, participation is sparse, and informed participation even sparser. This is no surprise: the system is too complicated. The big advantage of our economic system is that it is stunningly simple and people have incentives to participate. I think politics should learn something from it.

Best,

B.

Christine said...

I don't see any way to find out what such 'pristine economics' should be. I completely agree on being faithful to ones goals, but this requires the goals are known to begin with.Fair trades.

That is, those actions which are good for the involved parts.

The problem is how to satisfy global conditions.

Global interests are difficult to converge into a common interest factor. They are difficult to assess, involve difficult strategies. Such things get exceedingly complicated in larger and larger societies, with complex interactions and balances of power.

So you see: we get back to the fundamentals. Is it possible to have a system faithful to basic fair trades (local trades, easy to assess, satisfying the involved parts), but at the same time **leading spontaneously to a global fair trade**?

I think there are two opposite views, and nuances in between: a top-down one and a bottom-up one.

The current system is mostly a top-down one because it dictates, by those who have the power, what are the global goals. It is in a sense a bottom-up scenario as well, because it actually implements local trades: but the parts involved in such local trades have the power. This is the tragedy of the system.

So the best thing would be, IMO, to have a purely bottom-up approach, but one which would lead spontaneously to a global fair trade.

How would that be possible? The answer can only be quite radical, and, admittedly, too idealistic. One would have to change the concept of "power". Hence, a "self-governance" model. Some type of "superlative democracy", which means: a democracy in a society with equal opportunities *since birth*.

I firmly believe that such model can only be accomplished with deep, internal changes. This is because we still carry the trace of the "predator" which allowed us to survive. The question is whether we can evolve away from it. Or even if it makes sense to evolve away from it. Perhaps it is a simple question of human nature, impossible to change, so let us be "predators" forever and damn your "good intentions".

So the question may be that internal evolution is something that cannot occur under our simple wish. Other external factors may be much more determining conditions.

This is why I have an admittedly passive approach. Perhaps I am too old, and see no meaning in attempting to fix things that cannot be fixed, even in principle, except perhaps under a very deep and fundamental change. Yet, I still applaud Bee for her attempts. She is young and have good intentions. And she is open for trying to understand the needs and interests of others that have lived and live in conditions quite disconnected from her reality. I hope she finds what she looks for! Specially if she understands that her reality is not the reality of the greatest majority of people on the earth.

Giotis said...

Oh I see. You are calling "social market economy" what I call social democracy. I suppose these systems were trying to find a balance between the uncontrolled free market economy and a socialistic economy controlled by the state. They were pretty successful but I have the impression that after the collapse of the Soviet Union, pure capitalism dominated the world scene. With the current crisis though these models could become popular again.

The problem is that only rich countries can support these models. For example Germany is a very rich country with a large industrial sector and huge exports and so it can afford a welfare state. Similarly the Scandinavians are rich with strong economies. When Greece on the other hand tried to build a welfare state during the 80s it's economy nearly collapsed. The reason was that Greece is not a rich country and in order to finance a welfare state it had to borrow money from abroad. As a result its debt increased dramatically. I guess there's no such thing as a free lunch.

Andrei Kirilyuk said...

Bee, you first sound like “opinion poll” as the first method to use in a “scientific” approach, but then finally you still say that people tend to be wrong in their “typical” opinions (which you seem occasionally to know already) and thus should be sort of “scientifically persuaded” about better solutions and attitudes. Then why not to start with the last point from the beginning? Maybe you are cunning again and another major point is that a really good and therefore really convincing solution (for these new, emerging world conditions) doesn't really exist? That's why “Scandinavian” case may be important: is it “something like that”, our best possible common future, really and provably? Because if the problem is only to “convince” people in a well-known but incorrectly neglected “best” solution (as you seem to assume), then it is much more a “politically subjective”, than “scientifically objective” task. That's what politics is all about, after all, what is the best “ism” to eat for us, three times a day. One can always add a bit of “science” there, of course (that's why we like science: can be added to everything!), but it won't be any “big” (fundamental) and indispensable knowledge. Just a sponger, among others... While today's problems, they are not small or trivial at all. So maybe something much greater is still needed, despite the pressure of illusive “business-as-usual” attitudes?

Bee said...

Hi Giotis,

Well, it's not really so important, but 'social market economy' refers to an economic system, whereas any sort of democracy is a political system. The social democrats or democratic socialists in particular are a party (this party also exists in the USA, though few people seem to know it). Either way, even the conservatives in Germany believe in a social market economy substantially more than the conservatives in the USA, though you can of course see the neo-liberal impact also here.

I tend to agree that only rich countries can support a high level of social welfare, but that's not all a social market economy is about. It was generally put into place to avoid the unsocial side-effects a free market can have, for example to ensure wages are high enough so people can actually live from it. I wouldn't call that a high level of social welfare, I would call it an essential ingredient for feasibility of any social order. These are considerations for any economy that a nation should take seriously as
soon as they have a substantial amount of division of labor and the
inevitable dependencies that come with it. Social responsibility doesn't a priori require wealth. However, to come back to what we started from, as far as investments in art, culture, science etc are concerned, as I said, this becomes feasible only at a sufficiently high level of economic productivity, what you called 'saturation'.

Best,

B.

Andrei Kirilyuk said...

Christine, dear, you're sounding sort of “contradictory”, sort of half-way (between heaven and hell? :) ), especially in you previous “profession de foi”: on one hand, you strongly “want” something definitely better for this world, and on the other hand, your “hopes” resemble more a death sentence... Well, if your anticipation is that we're doomed, just feel free to say it openly, it's quite permitted in our apocalyptic epoch! Or if we're not absolutely doomed (just most probably :) ), then what could be your at least very general solution for us? Or at least, would you like to have/find one?! Your “faithful” recovery sounds a bit too indefinite and hardly possible anyway... (did you try harder caffeine doses? :) ) What's Christine's “personal pursuit” (because apparently all answers are hidden in that mystery of mysteries)?

OK, now in your last comment you do progress beyond it (that's why we like women: refreshing! :) ), although you still finally “depreciate” your own ideas, almost artificially (a Brazilian tradition? :) ). It's all up to you, of course, but sort of we are pressed much more to “advanced” solutions today, objectively, and therefore there is more sense to “insist” upon and elaborate them. After all, we're indeed scientists, a little...

As concerns “top-down” and “bottom-up”, you also seem to “dance around” the inevitably emerging solution: maybe we don't need any top/up at all, in today's meaning of “powers-that-be”? Let's just fall down, sisters and brothers (it just already happens anyway :) ), and have our wonderful bottom life down here! We can see very clearly, for example, that all their “top” scientists form their “top” labs are not only not better, but are often worse (much more harmful) for the world science, economy and ecology, than us bottom people down here. There are big individual differences everywhere, of course, but that stupid “domination of (standard) labels” is only harmful, definitely in science but why not everywhere else, in a wider meaning? And there is no problem to organise everything without predetermined “top positions” and it'll work really efficiently. As to “predator” (domination) instincts, there's always a greater predator behind your back...

What are “external factors” that can uniquely save us all? Jesus Christ, inter-stellar communications? Consider me an ET, then! I don't like playing prophets, but if necessary for the benefit of humanity... :)

“Perhaps I am too old...” No, you're too young, “idealistic”, diffident and inexperienced. Let me teach you everything. :) It's all necessary, of course, doubts and “idealism”, just in reasonable quantities, just enough to find novelties and then advance, “evolve in real time” as you fortunately like to do. You should rather be “added together” with Bee, as she is sufficiently “motivated” but maybe missing some necessary doubts and idealistic desire of something essentially greater (which may be objectively needed in today's world). So here's the breakthrough team, Bee and Christine as mutually complementing research forces and me as their preferred prophet and “external factor”. And the resulting better world, bottom-down approach, power to the people. Harvard will die from envy.

Bee said...

Christine: I am afraid you sound exactly like one of the globalization defenders. You know, in a free market all trade that happens IS fair. All those actions ARE good. If the market is just only truly free, Christine, all trade that happens DOES increase well-being.

"That is, those actions which are good for the involved parts.

The problem is how to satisfy global conditions."

No, the problem is how to find out what 'fair' means, what the 'global conditions' are and what is 'good' for the involved parts. Best,

B.

Christine said...

Ok, touché!

My position is difficult to defend because what I have are fuzzy concepts buzzing around which inevitably get interpreted differently or under some other label.

And, Andrei, you have a curious rationale. In any case, what is personal is personal, and contradiction is not always a universal trait -- it is in the eye of the beholder, specially human contradiction.

Arun said...

There are really two interwoven problems here:

1. To design efficient, stable, safe etc. economic mechanisms (analogous to designing safe vehicles)

2. To decide how and where to apply these mechanisms - what is good, fair, desirable, for the social good, etc., etc., (analogous to how to and what for to use the vehicles)

Giotis said...

Bee, speaking of economic and social systems, I've asked a couple of times for your opinion regarding the Zeitgeist movement but you didn't respond. Personally I like many of their ideas and I think that their model could work.

Andrei Kirilyuk said...

Christine, contradiction is also a motor of progress and therefore I am not afraid of it (provided there is progress :) ). In the rest, me I understand very well what you mean in your “fuzzy” concepts and find that Bee is a bit too “reductive” in her “iron” logic. The problem with it is that a logical scheme can be perfectly correct for a given system or level of development, but that doesn't mean that it's enough and one should only stick to it. Because real structures have permanently developing character and in particular a much greater change to a new level and kind of structure is possible (and actually happens from time to time). When it happens or ready to happen (like now), then that formally correct logic of previous, disappearing level remains there, but it's not important any more because at the new level everything will be different and universal abstract logical laws will take new forms and manifestations. Suppose, for example, quite in line with Christine's “idealism” and according to popular “utopian” anticipations, that a near-future society of a technically “developed” civilisation will be oriented rather to personal (mental) “self-perfection” purposes (like knowledge, education, creative arts, spiritual development, etc.), contrary to modern technically developed but still basically “primitive” Western civilisation (in its general top-preference orientation). [Just follow me, your preferred ET prophet, and then consider that we are already in that new world!] In that case it is especially easy to see that all these modern “market” problems, logic and attitudes just lose their meaning as such (don't even dream that today's ugly scientific “bazaar” based on absolutely “non-ideal”, low-level preferences can anywhere resemble that near future preferences and dynamics). Other “leading”, structure-forming factors will emerge, but they will be very different from those narrow sell-and-buy or “political” agendas. [And the door to the magic new world is always open, you know... And your ugly old world is falling anyway, obviously...] The same will be true for any other big change. For example, in the opposite case of catastrophic degradation (it's your “default” scenario, already in progress) those “market” and “democratic” arguments also lose their importance, but now “in the opposite direction”, so to say. Kinda you will be happy to get you at least something useful, by all means, and to be closer to the absolutely dominating oligarchic power (the latter is already the case in science, alas). So let's talk about market and democracy, while we still can. :) In many, maybe even larger parts of the world this “liberal” logic is rather senseless already today and there is no firm hope that it's “domain of validity” will grow from now on...

Plato said...

Of course I've bee watching from the sideline with interest. These discussions are the attempt for me to think about what is best in society, as we discuss facets of the economy.

Here's some of the things that I have been dealing with.

Sinking one's claws into the legal obtaining of licenses under the guise of a movement, is being used by, and devised a plan to control and own, the ability of using "a resource" to profit.

Let's call it a "green movement" toward "hydro development" for a sustenance of the communities power needs.

So what essentially could become a "resource management effort" by a social democratic country, was now being used through it's mandate toward privatization to "Powerup" all peoples under a strategic plan for investment, as ownership, to tap that resource of let's say a running river(instead of daming) with newer technologies to produce higher kilowatts.

So, "any country" could develop toward this end, a move toward privatization of let's say electricity toward, supporting people of that country.

Would you see "investment ownership" as vital to the prosper of that countries inhabitants through the world bank, or, the help toward successful independence with which this supplementation could advance the living conditions of it's own populace?

Now, I showed water as an issue here before, about what controls can do by marketing, that the price is set well above what the average populace income can bear, brings them to despair.

What does this say about the advancement of investment as an incentive in the economic system, while seeing that same populace having an innate right to satisfying a thirst for that same water?

So decipher the mechanism of that situation for me under the pretence of some "biological dissertation" about what should happen, with the prospective economy in this new Manhattan project.

What is man-made, and what is natural? I do appeal to what is right and truthful.

Best,

Phil Warnell said...
This comment has been removed by the author.
Phil Warnell said...

Hi Andrei,

To be honest all I sense in your rhetoric is anger and envy, with little clear useful advice in between. I would be the first to admit you have plenty and perhaps good reason(s) to feel as you do, since your nation is one at greatest risk of more immediate ruin then many others represented here . I have stated that I believe we are all in this together and that both benefit and risk should be shared. You on the other hand have as your greatest talent as being able to alienate others resultant of only recognizing your own focused view of things.

So as for who will be those leaders I mentioned, if any, I couldn’t say who they are; yet I maintain if they do surface they will discernable by the qualities they project and from what I’ve been able to gather thus far you are not among those I would consider. I find this not in the least gratifying or assuring in any way, as for one thing I’m certain of is that while many nations have demonstrated that they can be far worse than the best of their most educated, they seldom are able to be better. I therefore hope for your nation’s sake and all others that you only represent those mean of spirit and not the mean of potential.

Best,

Phil

Phil Warnell said...

Hi Bee,

“The big advantage of our economic system is that it is stunningly simple and people have incentives to participate. I think politics should learn something from it.”

The prime simplicity of the current economic system is that ability, influence and ultimate success is measured in money. I would ask then, if as you propose our political system is mirrored after it, what then would represent capitol and how should it be assigned and measured?

Best,

Phil

Phil Warnell said...

Hi Christine,

The models you submitted I find interesting, yet at the same time incomplete, for although success is not interconnected in what you envision as the current one, it has clearly been demonstrated that failure is. So my vision as to what is missing is as though they appear to be built and stand alone they are always undeniably connected. That is what has to be first realized as to being true before any meaningful restructuring can begin. The difficulty is to imagine how the dominoes can be seen as rasing up and what mechanism or force would be so capable.

Also, forgive the commercial aspect attached to my model, yet it was except for this, the best I could find:-)

Best,

Phil

jal said...

Hi Bee!
I hope to see the final result of the conference/workshops.
Reality does have a way of ruining a good theory and a good model. We do live on a planet with finite resources and will eventually find that this restrain all models that rely on “growth” for its sustainability.
There are now hundreds of blogs discussing the causes and the remedies that are being used.

The system has failed due to inherent internal flaws.

1. Capitalism is not the financial structure
2. Governments are not the enemy of capitalism that needs to be controlled or defeated
3. The financial establishment has already conquered the government and capitalism. The ordinary person is giving up 20% of his income if his credit card balance is equal to his monthly income. Also, businesses are being sucked dry by the credit cards companies (banks).
4. Capitalism, (business), should be helping the gov. in getting rid of the bankers off their backs.

Present and future actions
1. Stabilize the banks
2. Stop the economic depression
3. Governments are offering zero interest loans
4. Governments are printing money
5. Reform the financial system by getting rid of the systematic fault (compound interest)
6. Make banking a public utility

OH! Don't forget ... Those who cannot pay will not pay.

There are no political structures or financial structures without a sustainable social structure.

As a result the social fabric of the society must be protected by imposing strict enforceable laws to punish the greed and exploitation by unscrupulous parties.

The answer can probably be found in economic systems that have lasted longer than ours.

What system did the Egyptians use?
Why not look to the far east and find out what were their ancient system.

Central and South America had financial system that were able to sustain their social structures for a lot longer that capitalism, (with its use of credit/interest), has served us.

What were their mechanisms? (Periodic Debt Forgiveness? Ban on Usury? )
By the way,… “There are too many intermediaries skimming beans between the bean producers and the bean consumers”.
Jal

Harbles said...

Time Tough, Toots and the Maytals.

Phil Warnell said...

Hi Bee,

“The systems that we are using now just simply won't be functional on a global scale.”

Yes, I certainly agree for when it comes to global political structure, national structures certainly can’t be expected to be either loyal or sympathetic to the overall purpose or objectives. That is they are by their very nature created to be exclusive and biased in both intent and focus. That is why I was saying they should be elected directly by the people themselves and not simply appointed by counties.. There would be some things in common however, like parties that would project certain points view, reflecting varying global interests and strategies, rather than national ones. That is also why I said that only people where currently democracy is the practice be allowed to initially join and even among those global elections should not fall under national influence in terms of organization or oversight.

I realize for now all of this is nothing more than a pipe dream, yet like it or not, the necessity of it can’t be forever ignored, if our species is to last and to continue to progress. The greatest challenge of course is for the individuals themselves, for when they choose to either vote or serve in such a process will they be able to do so not from a personal, regional or national perspective, yet rather from a global one?

So the challenge is really not so much can we expand and make our existing systems more robust but rather can we as individuals expand our consciousness enough to imagine and embrace the new ones required being created. For me the primary essential and general objective should not be the economy, global warming, hunger, health, education and/or any individual concern or ambition; yet rather the ending of all war(s) and the ability to wage them as to have the soil be then properly prepared for what then only can proceed with any hope of success. That is to ever to be able to progress we must recognize and rid ourselves of our personal and universal flaws before we can proceed to build with the strengths which we have both individually and commonly.

So for me this is where the efforts of both science and the scientists of the world should be focused and not on any other particular one such as the current economy. It should be also the central focus for the greater intellectual community which would include all religions and itsleaders. That is to ask if the central objective of these people is not universal peace, individual dignity and reason to hope for a better shared future, what other is it they have a mind for?

Best,

Phil

jal said...

"David Li’s model was, for a period, profoundly useful."
Of couples and copulas
AND as we now know… Destructive

“Why did no one notice the formula’s Achilles heel? Some did. Nassim Nicholas Taleb, author of the bestselling The Black Swan – a book about the importance of considering outliers when looking at copulas – was a voluble critic of quantitative finance and Li’s formula. “The thing never worked,” he says. “Anything that relies on correlation is charlatanism.” “


Will the conference propose other models for evaluation?
jal