How the humanities survive on exploitation.
literally, as in Keynes’ (1936) phrase, taking into account “what average opinion expects the average opinion to be.”
…perfect rationality in the market cannot be well defined. Infinitely intelligent agents cannot form expectations in a determinate way.
This type of behavior–coming up with appropriate hypothetical models to act upon, strengthening confidence in those that are validated, and discarding those that are not–is called inductive reasoning.
We see immediately that the market possesses a psychology. We define this as the collection of market hypotheses, or expectational models or mental beliefs, that are being acted upon at a given time.
the first(?) mention of a genetic model in the book
Chapter 2 is a nice piece on the El Farol Problem which is a paradox which “represented a decision problem where expectations (forecasts) that many would attend [the El Farol bar] would lead to few attending, and expectations that few would attend would lead to many attending: expectations would lead to outcomes that would negate these expectations.”
Zhang and Challet generalized this problem into the Minority Game in game theoretic form.
There are two reasons for perfect or deductive rationality to break down under complication. The obvious one is that beyond a certain level of of complexity human logical capacity ceases to cope–human rationality is bounded. The other is that in interactive situations of complication, agents cannot rely upon the other agents they are dealing with to behave under perfect rationality, and so they are forced to guess their behavior. This lands them in a world of subjective beliefs and subjective beliefs about subjective beliefs. Objective, well-defined, shared assumptions then cease to apply. In turn, rational, deductive reasoning (deriving a conclusion by perfect logical processes from well-defined premises) itself cannot apply. The problem becomes ill-defined.
This passage, though in an economics text, seems to be a perfect statement about part of the problem of governing in the United States at the moment. I have a thesis that Donald Trump is a system 1 thinker and is generally incapable of system 2 level thought, thus he has no ability to discern the overall complexity of the situations in which he finds himself (or in which the United States finds itself). As a result, he’s unable to effectively lead. From a complexity and game theoretic standpoint, he feels he’s able to perfectly play and win any game. His problem is that he feels like he’s playing tic-tac-toe, while many see at least a game as complex as checkers. In reality, he’s playing a game far more complex than either chess or go.
The overall problem laid out in this chapter is an interesting one vis-a-vis the issues many restaurant startups face, particularly in large cities. How can they best maximize their attendance not only presently, but in the long term while staying afloat in very crowded market places.
The level at which humans can apply perfect rationality is surprisingly modest. Yet it has not been clear how to deal with imperfect or bounded rationality.
Chapter 3 takes a similar problem as Chapter 2 and ups the complexity of the problem somewhat substantially. While I understand that at the time these problems may have seemed cutting edge and incomprehensible to most, I find myself wondering how they didn’t see it all from the beginning.
This book considers a relatively new metric in complex systems, transfer entropy, derived from a series of measurements, usually a time series. After a qualitative introduction and a chapter that explains the key ideas from statistics required to understand the text, the authors then present information theory and transfer entropy in depth. A key feature of the approach is the authors' work to show the relationship between information flow and complexity. The later chapters demonstrate information transfer in canonical systems, and applications, for example in neuroscience and in finance. The book will be of value to advanced undergraduate and graduate students and researchers in the areas of computer science, neuroscience, physics, and engineering. ISBN: 978-3-319-43221-2 (Print), 978-3-319-43222-9 (Online)
I started writing this back in November 2013, and put it aside until I had read the Skidelskys' book. I haven't finished yet, but ...
How strange to hear J.M. Keynes himself on the radio, telling us in his clipped tones how in 100 years time we would be eight times richer than we were then, how we would work a 15-hour week, how "Human beings would be more like the 'lilies of the field, who toil not, neither do they spin'." A little extract of Keynes talking about his essay Economic Possiblities for our Grandchildren, written in 1930, ended Laurie Taylor's interview with Robert Skidelsky on Thinking Allowed.
I skate around economics; I'm fascinated by it, although I have no formal training, and I do see how the allocation of scarce resources is the great problem of life. I also feel, as a biologist, that so much of what passes for sound economics is astonishingly naive, no matter how complex it may seem. Bad-mouthing Malthus, for example, just seems fundamentally stupid to me. Skidelsky, as befits a biographer of Keynes, was talking about the idea of enough, rehearsing ideas from his book How Much is Enough?: Money and the good life, co-written with his son Edward Skidelsky.
The spread of exotic grains is evidence that globalisation works
The world’s foremost expert on pricing strategy shows how this mysterious process works and how to maximize value through pricing to company and customer.
In all walks of life, we constantly make decisions about whether something is worth our money or our time, or try to convince others to part with their money or their time. Price is the place where value and money meet. From the global release of the latest electronic gadget to the bewildering gyrations of oil futures to markdowns at the bargain store, price is the most powerful and pervasive economic force in our day-to-day lives and one of the least understood.
The recipe for successful pricing often sounds like an exotic cocktail, with equal parts psychology, economics, strategy, tools and incentives stirred up together, usually with just enough math to sour the taste. That leads managers to water down the drink with hunches and rules of thumb, or leave out the parts with which they don’t feel comfortable. While this makes for a sweeter drink, it often lacks the punch to have an impact on the customer or on the business.
It doesn’t have to be that way, though, as Hermann Simon illustrates through dozens of stories collected over four decades in the trenches and behind the scenes. A world-renowned speaker on pricing and a trusted advisor to Fortune 500 executives, Simon’s lifelong journey has taken him from rural farmers’ markets, to a distinguished academic career, to a long second career as an entrepreneur and management consultant to companies large and small throughout the world. Along the way, he has learned from Nobel Prize winners and leading management gurus, and helped countless managers and executives use pricing as a way to create new markets, grow their businesses and gain a sustained competitive advantage. He also learned some tough personal lessons about value, how people perceive it, and how people profit from it.
In this engaging and practical narrative, Simon leaves nothing out of the pricing cocktail, but still makes it go down smoothly and leaves you wanting to learn more and do more―as a consumer or as a business person. You will never look at pricing the same way again.
Once, long ago, being richer meant working less.
Fortune round-up 5 business books to learn from.
Professor Arrow, one of the most brilliant minds in his field during the 20th century, became the youngest economist ever to earn a Nobel at the age of 51.
I did not know that that the famous Monty Python spam sketch was recorded on 6 June 1970. At least, that’s the claim of a Tumblr obsessed with Minnesota in the 1970s. (Wikipedia says only that “[i]t premiered on 15 December 1970”.) However, I need no encouragement to share a programme on Spam that I made for BBC Farming Today back in 1997, a programme that was both very well received and a blast to make. the people at Hormel couldn’t have been nicer, and the butterfly spam balls weren’t bad either.
There’s so much more to spiced ham than one could have ever thought. It’s not only a great slice of Americana, but there’s some science and interesting economics behind the things that go into making it. Both a fun and fascinating episode.
Driven by technological progress, human life expectancy has increased greatly since the nineteenth century. Demographic evidence has revealed an ongoing reduction in old-age mortality and a rise of the maximum age at death, which may gradually extend human longevity. Together with observations that lifespan in various animal species is flexible and can be increased by genetic or pharmaceutical intervention, these results have led to suggestions that longevity may not be subject to strict, species-specific genetic constraints. Here, by analysing global demographic data, we show that improvements in survival with age tend to decline after age 100, and that the age at death of the world’s oldest person has not increased since the 1990s. Our results strongly suggest that the maximum lifespan of humans is fixed and subject to natural constraints.
The first generation of the digital revolution brought us the Internet of information. The second generation—powered by blockchain technology—is bringing us the Internet of value: a new, distributed platform that can help us reshape the world of business and transform the old order of human affairs for the better.
Blockchain is the ingeniously simple, revolutionary protocol that allows transactions to be simultaneously anonymous and secure by maintaining a tamperproof public ledger of value. Though it’s the technology that drives bitcoin and other digital currencies, the underlying framework has the potential to go far beyond these and record virtually everything of value to humankind, from birth and death certificates to insurance claims and even votes.
Anyone have recommendations of books they liked?
HIS inauguration is still six weeks away but Donald Trump has already sent shock waves through American business. Chief executives—and their companies’ shareholders—are giddy at the president-elect’s promises to slash burdensome regulation, cut taxes and boost the economy with infrastructure spending.
Highlights, Quotes, & Marginalia
American capitalism has flourished thanks to the predictable application of rules. If, at the margin, that rules-based system is superseded by an ad hoc approach in which businessmen must take heed and pay homage to the whim of King Donald, the long-term damage to America’s economy will be grave.
Such tariffs would be hugely disruptive. They would make goods more expensive for American consumers. By preventing American firms from maximising their efficiency using complex supply chains, they would reduce their competitiveness, deter new investment and, eventually, hurt workers’ wages across the economy. They would also encourage a tit-for-tat response.
The role of lobbyists will grow—an irony given that Mr Trump promised to drain the Washington swamp of special interests.
Nonetheless, Mr Trump’s approach is worrying. Unlike the Depression, when Hoover and then Roosevelt got companies to act in what they (often wrongly) saw as the national interest; or 2009, when Mr Obama corralled the banks and bailed out Detroit, America today is not in crisis. Mr Trump’s meddling is thus likely to be the new normal. Worse, his penchant for unpredictable and often vindictive bullying is likely to be more corrosive than the handouts most politicians favour.
Mr Trump’s mercantilism is long-held and could prove fierce, particularly if the strong dollar pushes America’s trade deficit higher (see article). Congress would have only limited powers to restrain the president’s urge to impose tariffs. More important, even if rash protectionism is avoided, a strategy based on bribing and bullying individual companies will itself be a problem.
But over time the damage will accumulate: misallocated capital, lower competitiveness and reduced faith in America’s institutions. Those who will suffer most are the very workers Mr Trump is promising to help. That is why, if he really wants to make America great again, Mr Trump should lay off the protectionism and steer clear of the bullying right now.
It’s a constant state of flux, with jobs being created or lost. The challenge is to have a business climate in which you have more of the former.