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The Physics of Finance's Blog

Market complexity also makes for instability

April 11, 2017 Comments (0)

Since the financial crisis of 2008, an explosion of research has aimed to understand what makes financial markets prone to sporadic crises. The potential sources of trouble are many, including debt and leverage, financial concentration and the problem of “too big to fail,” as well as perverse incentives for bankers to take on large risks. Markets go wrong in any of a thousand ways, and, unfortunately, it seems that understanding each one requires intimate familiarity with the fine details of...

The (un)Wisdom of Crowds

July 10, 2016 Comments (0)

Does the Wisdom of Crowds work for elections? Should we think that the result of the British Brexit vote, because it was a free vote put to the people, was not only democracy in action, but also a wise method for a nation to make such a decision? I've touched on this matter in my latest Bloomberg View column, drawing on a new study on group decision making by researchers from the Santa Fe Institute and the Max Planck Institute for Human development in Berlin. This study asks under what...

Improve technology -- and still use more stuff overall??

February 17, 2016 Comments (0)

A while back I had a brief argument with Paul Krugman and some other economists over economic growth and the future of the planet. It's common knowledge, of course, that human use of materials has grown over time -- globally, we now use more steel, plastic, glass, oil, water, etc. than ever before. We use more energy than ever before, and our agriculture puts more phosphorous and nitrogen into the oceans than ever before, and these trends toward more usage of physical stuff of every kind...

Economic growth -- vastly slower than we thought (maybe)

February 16, 2016 Comments (0)

You'd think that by now we'd have a pretty good empirical understanding of how economies grow, i.e. what the normal pattern of growth is through time. We've been studying economies for a couple of centuries, and have had reasonably good numbers of the (crude) measure of GDP for half a century. In economics -- and among the financial media generally -- it's almost beyond question that the normal pattern of economic growth is exponential growth. Indeed, almost no one ever supposes it might be...

Shifting view

February 1, 2016 Comments (0)

Hey, I've changed the title of this blog! Why? Because I'm going to shift its perspective a little. As all of you will know, I've (mostly) stopped blogging here in the past 4-6 months. Reason? Because much of what interests me now has no immediate link to "finance," and so "physics of finance" doesn't seem quite right. I'd like to eliminate this psychological barrier (for myself).  So, expect more posts, but maybe on different topics. Cheers Mark

Warfare isn't getting less likely -- conclusions from a new analysis

May 18, 2015 Comments (0)

Is warfare getting less likely? Are we entering a new and more peaceful era of history? Quite a few people -- Steven Pinker and Niall Ferguson among them -- have suggested as much. But the mathematics of war statistics over the past 2,000 years doesn't back up the idea. At Bloomberg, I have a short piece describing some excellent new work by Pasquale Cirillo and Nassim Taleb. Also, more detail over at Medium.

To save the world -- give up on nature?

May 6, 2015 Comments (0)

Here's a radical idea -- we can best safeguard the future of humanity not by learning to live with nature, but by turning our backs on her and learning to do without her. We should use our technology and science to isolate ourselves from nature, so that we can live without requiring nature. In so doing, we can also eliminate the burden we put on nature, and preserve it as well. Does that sound crazy? A little, I think, but it is a creative idea and maybe some tempered and humble version of it...

Common core and common rancor

March 30, 2015 Comments (0)

My most recent thing in Bloomberg touches on the Common Core standards for learning. It's amazing how some things that ought to be pretty good for everyone can be controversial, but... Learning how to distinguish between fact and opinion would seem to be a pretty fundamental piece of any education. In the bizarre world of U.S. public schools, though, it's proving to be controversial. For several years, schools across the U.S. -- with significant help from the Bill and Melinda Gates...

Macroeconomics: "not remotely scientific"

February 16, 2015 Comments (0)

Excellent post by Noah Smith examining the question of why so many people who aren't trained economists like to weigh in with views on macroeconomics. One reason, he suggests, is that people look at macro and see a modelling approach that doesn't seem terribly plausible, and they also see lots of macroeconomists disagreeing over fundamental points. What they see mostly looks like ideology dressed up to look like something else. As he notes, There is the perception that macroeconomists don't...

Presuppositions and idealizations...

January 20, 2015 Comments (0)

Lars Syll quotes an interesting passage from Hans Albert on the weird use of theoretical abstraction in economics; "weird" as in very unusual and rather questionable from the perspective of the rest of science. As Albert writes, Clearly, it is possible to interpret the ‘presuppositions’ of a theoretical system … not as hypotheses, but simply as limitations to the area of application of the system in question. Since a relationship to reality is usually ensured by the language used in...