eldavojohn writes "A new award-winning thesis from an MIT computer science assistant professor showed that the Nash equilibrium of complex games (like the economy or poker) belong to problems with non-deterministic polynomial (NP) complexity (more specifically PPAD complexity, a subset of TFNP problems which is a subset of FNP problems which is a subset of NP problems). More importantly there should be a single solution for one problem that can be adapted to fit all the other problems. Meaning if you can generalize the solution to poker, you have the ability to discover the Nash equilibrium of the economy. Some computer scientists are calling this the biggest development in game theory in a decade."
Polynomial time approximate, probabilistic or special case solutions to NP problems are wide spread. The problem is that real human being in economics can not be easily described by an equation - and when they can be, they quickly change their behavior based on that knowledge. What both computer scientists and economists need to learn is stop being geeks addicted to a single theory and start dealing with people.
The emergent intelligence of the market will likely never be able to be simulated.
A centralized model can't react in real time to factors that change by the minute or by the second like human actors can.
What was desirable to us one minute ago may no longer be desirable to us. What was desirable one minute ago to me may have never been desirable to you!
No formula can ever quantify that value. It's subjective.
the point is, however, that its probable that a certain product or commodity will be desirable by somebody, or even a group of somebodies, at some point in time, based on past interactions in the marketplace.
I'd say it goes beyond that: humans can't react to those factors either. Where do you think the current credit meltdown came from? Humans were not able to model the credit market behavior, just as much as the mathematical models were unable to do so.
It is not even subjective - I'd argue it's almost quantum mechanical: the mere act of looking at a market changes its behavior. The advantage of modeling quantum mechanical systems though is that they don't change their rules just to spite you. The certainty for
There are entire schools of economics that criticize the mainstream schools using this very line of reasoning. IIRC, the Austrian school economists (Mises, Menger, et. al) never use any sort of math at all, except in trying to determine things such as the rate of inflation. There are others, too, but their names escape me at the moment.
Well, I'm not surprised there is such school. My impression is, that economists in general don't have a good grasp of math, specifically, they don't seem to understand the exponential function, otherwise they would not speak of "growth" all the time. I'm not saying one should not take human behavior into account, but at least they should get the boundary conditions right, and one of those is that our resources are limited.
I'm not saying one should not take human behavior into account, but at least they should get the boundary conditions right, and one of those is that our resources are limited.
That does not mean that additional wealth cannot be created without infusion of additional resources.
I know it's counterintuitive for most people with a "hard science" background... I struggled with it as an undergrad. But economics is not a zero-sum game. I give you $150 and you give me an hour of labor. We've both benefited by the trade. If we are really acting freely, we've both benefited (or we wouldn't have engaged in the trade), so we are both wealthier than we were before. This is the fundamental basis of perpetual economic growth... given a free market* in which to pursue trades, wealth increases as trades are made.
* Free as in some-kind-of-approximation-of-an-ideal-free-market, not free as in no-legal-restrictions-on-activity.
by Anonymous Coward
on Monday November 09, @07:02PM (#30040420)
I give you $150 and you give me an hour of labor. We've both benefited by the trade.
This is the fundamental basis of perpetual economic growth... given a free market* in which to pursue trades, wealth increases as trades are made.
This argument echoes the exact same stupidity of the "perpetual growth" nuts that got us into this economic mess in the first place. You believe that infinite trades are possible, and that resource limitations don't apply. But even in your own example, you're talking about trading one limited resource (labor) for another (money). And yes, money is a limited resource - you can print all the money you want, but since doing so doesn't increase the amount of actual value that that money represents, all you're really doing is devaluing the existing money supply in order to redistribute the underlying value (i.e., stealing a little bit of value from everybody who's currently holding any of the existing bills, and giving the loot to someone else - usually a central bank).
Perpetual growth is nothing more than an illusion shared amongst fools. Value doesn't magically spring into existence by the mere act of trading something back and forth. Value can only be created by consuming resources. Whether that resource is energy, or some natural resource such as coal or iron, or human labor, etc, there is only a finite amount of that resource. Furthermore, many of these resource limits are things we are either already bumping into, or things that we will bump into in the foreseeable future, such as in the case of the various natural resources we've come to rely on.
Value can only be created by consuming resources. Whether that resource is energy, or some natural resource such as coal or iron, or human labor, etc, there is only a finite amount of that resource.
Wrong.
Simplified example: Let us assume you require 2 tons of rock to build a home. Then somebody teach you to build a better home from 1 ton of rock.
Now you have 1 spare ton of rock and a better home. Obviously, we have created value.
Economics is not about measuring the total amount of resources on earth. In the end, it is about efficiency, trading work and resources to always make more efficient use of resources.
Improved efficiency = Satisfying needs of more people with the same amount of resources = value.
But economics is not a zero-sum game. I give you $150 and you give me an hour of labor. We've both benefited by the trade.
In all but the world's oldest profession, I'm inclined to disagree.
Here's one:
Person A runs a tavern. Person B (after a few beers) drives his car into that of Person A. Person B pays $150 to Person C to fix the scratches on Person A's car. Person C uses his $150 income at Person A's tavern.
Who profited by the exchange of $150? Are all three people better off?
I think in all but the most ideal circumstances, it is indeed zero-sum game.
I think it should be palpably obvious that the obvious is true, from a simple examination of the world around you, and of history. If the economy (let's use the right term, economics is an area of study) of the world as a whole is a zero sum game, then wealth in the world could not consistently increase. And yet, for 100's of years, wealth has consistently increased, and has done so for virtually everyone in most economies. The
It's still a zero sum game in terms of the resources. Pretending it's not is exactly why the economic system is so damn broken.
That's not a useful way to look at an economic system. My value and whether I can fulfill my desires is not a function of how many tons of tin I use up or slaves I control. Plus, it's worth mentioning that we have more resources now than we did a century ago. Our knowledge (a typical good that doesn't depend on available resources) has grown allowing us to access resources that we couldn't access earlier.
Well, I'm not surprised there is such school. My impression is, that economists in general don't have a good grasp of math, specifically, they don't seem to understand the exponential function, otherwise they would not speak of "growth" all the time.
I'm not saying one should not take human behavior into account, but at least they should get the boundary conditions right, and one of those is that our resources are limited.
Your impression is wrong. Every economist knows about Thomas Robert Malthus [wikipedia.org] and Malthusian economics -- for the pre-industrial era his model best explains demographics and the limits of growth. It only so happened that just after he published his thoughts, the industrial revolution happened and technological progress pushed the boundaries of growth further and further - in an exponential manner.
Would you dare to make an exact forecast where the limits of growth lie? Limited by fossil fuels? Or a single planet's worth of solar energy? Maybe a Dyson sphere's worth of solar energy? Technological progress moves the goalposts rapidly enough that you have to assume exponential growth punctuated by occasional catastrophes - at least for the next 50 years.
Fundamentally, Malthus was right. Exponential growth cannot continue indefinitely. At some point, resources will become limiting and exponential growth of human populations (and economies) will not be possible. The most extreme example of a limiting resource could be the number of atoms in the universe, but in practice, a realistic limit could very well end up being something as simple as oil.
Perhaps it is true that the assumption of constant exponential growth is a safe for the next one or few generati
Friedman wasn't an Austrian in any sense of the word. Hayek, though, is who I'm talking about. And Rothbard, Hayek, and Mises all had their own disagreements. Rothbard dedicates a tiny section of one of his books (For a New Liberty?) to a critique of Mises's claim that economics lacks value judgements, for example.
I was about to say the same thing. Unlike poker, the rules of the games are altered based on the current knowledge about the state of the game. This means that as soon as someone proclaims "We know the rules of Economics!", someone else is going to look at those rules and either game them to their benefit, or rewrite them to better suit their own purpose.
Computer Scientists - and Economists - have a habit of assuming that they just need to find the proper model for human behavior, and all the problems will be solved. That's because that's how it works in a science: you assume the rules don't change in an arbitrary fashion. Humans, however, do. This makes any prediction of human behavior a statistical undertaking at best. Your success will be measured by how much better you compared to a random decision making process. At worst, the statistical anomaly completely wrecks your model - see the Black Swan Theory in Economics.
Computer Scientists - and Economists - have a habit of assuming that they just need to find the proper model for human behavior, and all the problems will be solved.
There are two problems with that statement. First, that's not how computer scientists and economists work. Second, even if they did, how do you know they would be wrong in that assumption? I ignore here the laziness of claiming that economists would consider a mathematical model of human behavior a solution to "all" problems, including completely unrelated problem like opening a stiff door or how to wash the small of one's back while in the shower.
Polynomial time approximate, probabilistic or special case solutions to NP problems are wide spread. The problem is that real human being in economics can not be easily described by an equation - and when they can be, they quickly change their behavior based on that knowledge.
No, I'd say that we're dealing here with two facets of the same problem: the unreality of Homo economicus. The classic objection to economic theory is that people don't act "rationally" in the sense that economic theory requires them
That experiment where people are asked to split $100 and the other person sometimes wants none of it is shown as example of irrational behavior, but I don't think it is. If someone chooses to split it $80/$20 and the other person says no, knowing they will then get nothing, that isn't necessarily irrational: they might just value punishing the other person more than getting $20 themselves. So it's perfectly rational. Perhaps you considered this and that's why you put irrational in quote marks.
I'm sure it's great to repeat cliche lines when it comes to economics and computer science, and I know it's super popular with the recent quant economics and stock market debacle. But it'd be kind of nice if people knew what a Nash equilibrium is in the first place. If I use a Nash equilibrium strategy, it doesn't matter *how* you change your behaviour, you can't benefit from it. Think minimax algorithm in zero-sum games.
This is a perfectly sound mathematical concept, in a mathematical sense it's as true as
By showing that some common game-theoretical problems are so hard that they'd take the lifetime of the universe to solve, Daskalakis is suggesting that they can't accurately represent what happens in the real world.
Hayek [wikipedia.org] showed that about 50 years ago:
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." (The Fatal Conceit, p. 76)
Unfortunately, there is a lot of designing going on right now.
And his teacher, Mises, before him in his work Human Action devoted an entire section of that massive tome to just this very topic: that humans are not equations.
From said tome:
No laboratory experiments can be performed with regard to human action. We are never in a position to observe the change in one element only, all other conditions of the event remaining unchanged. Historical experience as an experience of complex phenomena does not provide us with facts in the sense in which the natural sciences employ this term to signify isolated events tested in experiments. The information conveyed by historical experience cannot be used as building material for the construction of theories and the prediction of future events. Every historical experience is open to various interpretations, and is in fact interpreted in different ways.
The postulates of positivism and kindred schools of metaphysics are therefore illusory. It is impossible to reform the sciences of human action according to the pattern of physics and the other natural sciences. There is no means to establish an a posteriori theory of human conduct and social events. History can neither prove nor disprove any general statement in the manner in which the natural sciences accept or reject a hypothesis on the ground of laboratory experiments. Neither experimental verification nor experimental falsification of a general proposition is possible in its field.
No laboratory experiments can be performed with regard to human action.
One of the most profoundly stupid statements ever uttered by an economist. Sure you can't stick the global economy in a beaker and have controls and the other paraphernalia of controlled lab tests, the highest standard of science. But you can experiment with human action at the individual or small group in a controlled lab. It's routinely done these days. There is such a thing as experimental verification and falsification.
Interesting link -- but CS does provide mechanisms for creating "trust worthy" bundles securities, in the form of one-way functions. If the seller says, "I distributed the asset types among these securities using a random number generator built on a cryptographically secure one-way function with the following seed", it is possible to have a high degree of confidence that the distribution really is random. The seller can rejigger the seed but the one-way function (statistically) prevents more than a certai
Meaning if you can generalize the solution to poker, you have the ability to discover the Nash equilibrium of the economy
The general solution to poker is to end the game with everyone elses money to make yourself richer. Some people have already applied this strategy to the economy.
Once you factor debt and fractional reserves into the picture, the game changes quite a bit. The current crisis is that the players bet WAY more than they had, and they are all afraid to call, since they secretly know that EVERYBODY is bluffing. So the game (and the stock market) keeps going up as the players trying to outbluff each other with "I'll see your billion and raise you three more". And it will keep going up until somebody has to actually put something of value in the pot.
Except that investors routinely bet more than they have, and in fact, this is a fundamental tenet of a modern economy. This is how banks manage to make money; they loan out money they do not technically have, with the understanding that in most cases they will get it back with a profit. Many businesses operate in this way, taking out loans for periodically required large investments (like fertilizer and fuel for a farm), making enough of a profit to repay the loan, with interest, and pay their employees,
It all comes down to regulation and taxation. The government's laissez faire
lack of regulation encourages increasong levels of risk taking as you pointed out, but regulation alone is not the answer.
As long as people are allowed to keep extraordinary profits, the motivation is there to game whatever system is in place and this leads to a neverending race. Only strong levels of taxation (where by strong, I mean 95% taxation on all forms of personal income above a certain threshold, eg 200k) can make people
From the article:
"By showing that some common game-theoretical problems are so hard that they’d take the lifetime of the universe to solve, Daskalakis is suggesting that they can’t accurately represent what happens in the real world."
But he didn't actually show this. He showed (again from TFA):
"Daskalakis proved that the Nash equilibrium belongs to a subset of NP consisting of hard problems with the property that a solution to one can be adapted to solve all the others." I.e. computing the Nash equilibrium is NP-complete.
These problems have no efficient solution if (and only if) P != NP. That is if there is a polynomial (efficient) solution for any of these, then there is a polynomial time solution for all. We don't know WHETHER THAT'S TRUE. Computer scientists suspect very strongly that there is no polynomial time solution for these problems, but it isn't known for sure.
Now would be a GREAT time to go alter the wikipedia articles on NP completeness and such, then watch the aftermath on slashdot as the n00bs go do their research and learn what it is for the first time!
The biggest problem we face is post-scarcity technologies of abundance wielded by scarcity-obsessed people, because things like biotech, robotech, infotech, nanotech, nucleartech, and so on make terrible, if ironic, weapons. It is ironic to use military robots to fight over economic issues the robots make obsolete. It is ironic to use nuclear missiles built with advanced materials to fight over oil supplies that nuclear power or solar energy make unimportant. It even takes more electricity to produce a gallon of gasoline than an electric car takes to go the same distance, if you really want some deep irony -- we'd use less electricity if we switched to electric cars. So, as an example of post-scarcity thinking, considering that and safety issues, our society would save money and have lower taxes if everyone got a free-to-the user safe luxury electric car. http://groups.google.com/group/openmanufacturing/msg/09eb7f4c973349f2?hl=en [google.com]
From Post-scarcity Princeton: http://www.pdfernhout.net/post-scarcity-princeton.html [pdfernhout.net] """ * Some comments on the PU Economics department and related research directions from a post-scarcity perspective
The PU economics department, of course, should be abolished as part of this transition.:-)
OK, that will never happen, so it should be at least "strongly admonished" for past misbehavior.:-(
What misbehavior? Essentially, the PU Economics department has taken part in a global effort to build an economic "psychofrakulator". How does a psychofrakulator work? Consider a paraphrase of something Doc Heller says in the movie Mystery Men: http://www.imdb.com/title/tt0132347/quotes [imdb.com]
Dr. Heller: It's a psychofrakulator. They used to say it couldn't be built. The equations were so complex that most of the scientists that worked on it wound up in the insane asylum [in Chicago].... It creates a cloud of [dollar denomiated] radically-fluctuating free-deviant chaotrons which penetrate the synaptic relays [via television]. It's concatenated with a synchronous transport switch [of values from long term seven generation life-affirming love of caring to short-term immediate profit and immediate gratification suicidal death-affirming love of money] that creates a virtual tributary [back to large corporations]. It's focused onto a biobolic reflector [of the elite controlled mass media] and what happens is that [economic] hallucinations become reality and the [global] brain [and global ecosystem] is literally fried from within.
Conservative economic policy is dead. It committed suicide. Its allegiance to market solutions, tax cuts and spending cuts, supply-side nonsense, manipulative and corrosive ties to industry and the rich, have left it wholly unable to cope with the challenges we face. Its terribly limited toolbox simply cannot address the economic insecurities and opportunities generated by today's global, interconnected, polluted, insecure, dyna
That's why the goal [wikipedia.org] is to dumb down the average person and limit his choices until we're at the level of a THX 1138/Brave New World society.
Don't be shocked, the MIT article doesn't even get the simple example of game theory right:
One of the simplest examples is the penalty-kick game: In soccer, a penalty kick gives the offensive player a shot on goal with only the goalie defending. The goalie has so little reaction time that she has to guess which half of the goal to protect just as the ball is struck; the shooter tries to go the opposite way. In the game-theory version, the goalie always wins if both players pick the same half of the goal, an
And the best strategy for the shooter is to place the ball in the corner where the goalie can't reach it even if guesses the right side. The only problem with this strategy is that it increases the risk of missing the goal entirely, which not only losses the 50-50 chance but is also extremely embarrassing. So the optimal strategy is only valid for really good shooters.
And we are not even covering the options of feints, but game theory of feints gets silly. Is is feinting for real or is he feinting to make m
Not so. There is a reason this class of problems is called "non-deterministic". That is because there is no way to determine, ahead of time, whether a finite solution for this problem exists!
No, that's just wrong. The problems are called non-deterministic polynomial (NP) because they can be solved in polynomial time by a non-deterministic turing machine. A non-deterministic turing machine is a turing machine that can take go into multiple states and accepts an input if any of it's states end up leading to an accept state. Think superposition of states with a wave collapse if you're a physicist.
All of these problems have finite solutions and in fact one of the requirements is that a NP proble
I have graduate degrees in both Computer Science and Economics and this commonality was so obvious to me over a decade ago that it wouldn't have seemed worth writing about. Hell, you even study Von Neumann in both of these fields at the undergraduate level.
Just because it can't make perfect predictions all of the time doesn't mean that it is useless. You're right, people aren't rational and random chance plays into most things. If you ever take an Econometrics class, you'll learn that predictive Econometric equations always include a random error variable.
Furthermore, in your example, I don't think that showing that people don't take the most selfish path is a "useless" finding. What they did was generate data about how people usually behave. Concepts from Ps
The problem is not an efficient algorithm (Score:4, Interesting)
Polynomial time approximate, probabilistic or special case solutions to NP problems are wide spread. The problem is that real human being in economics can not be easily described by an equation - and when they can be, they quickly change their behavior based on that knowledge. What both computer scientists and economists need to learn is stop being geeks addicted to a single theory and start dealing with people.
Re:The problem is not an efficient algorithm (Score:4, Insightful)
The emergent intelligence of the market will likely never be able to be simulated.
A centralized model can't react in real time to factors that change by the minute or by the second like human actors can.
What was desirable to us one minute ago may no longer be desirable to us.
What was desirable one minute ago to me may have never been desirable to you!
No formula can ever quantify that value. It's subjective.
Parent
Re: (Score:3, Insightful)
the point is, however, that its probable that a certain product or commodity will be desirable by somebody, or even a group of somebodies, at some point in time, based on past interactions in the marketplace.
Re: (Score:3, Interesting)
I'd say it goes beyond that: humans can't react to those factors either. Where do you think the current credit meltdown came from? Humans were not able to model the credit market behavior, just as much as the mathematical models were unable to do so.
It is not even subjective - I'd argue it's almost quantum mechanical: the mere act of looking at a market changes its behavior. The advantage of modeling quantum mechanical systems though is that they don't change their rules just to spite you. The certainty for
Re: (Score:3, Informative)
Actually, some were [wordpress.com]. The people in charge just didn't listen to the right people.
Re:The problem is not an efficient algorithm (Score:5, Informative)
Parent
Re:The problem is not an efficient algorithm (Score:5, Interesting)
Well, I'm not surprised there is such school. My impression is, that economists in general don't have a good grasp of math, specifically, they don't seem to understand the exponential function, otherwise they would not speak of "growth" all the time.
I'm not saying one should not take human behavior into account, but at least they should get the boundary conditions right, and one of those is that our resources are limited.
Parent
Re:The problem is not an efficient algorithm (Score:5, Informative)
That does not mean that additional wealth cannot be created without infusion of additional resources.
I know it's counterintuitive for most people with a "hard science" background... I struggled with it as an undergrad. But economics is not a zero-sum game. I give you $150 and you give me an hour of labor. We've both benefited by the trade. If we are really acting freely, we've both benefited (or we wouldn't have engaged in the trade), so we are both wealthier than we were before. This is the fundamental basis of perpetual economic growth... given a free market* in which to pursue trades, wealth increases as trades are made.
* Free as in some-kind-of-approximation-of-an-ideal-free-market, not free as in no-legal-restrictions-on-activity.
Parent
Bullshit! (Score:4, Insightful)
This argument echoes the exact same stupidity of the "perpetual growth" nuts that got us into this economic mess in the first place. You believe that infinite trades are possible, and that resource limitations don't apply. But even in your own example, you're talking about trading one limited resource (labor) for another (money). And yes, money is a limited resource - you can print all the money you want, but since doing so doesn't increase the amount of actual value that that money represents, all you're really doing is devaluing the existing money supply in order to redistribute the underlying value (i.e., stealing a little bit of value from everybody who's currently holding any of the existing bills, and giving the loot to someone else - usually a central bank).
Perpetual growth is nothing more than an illusion shared amongst fools. Value doesn't magically spring into existence by the mere act of trading something back and forth. Value can only be created by consuming resources. Whether that resource is energy, or some natural resource such as coal or iron, or human labor, etc, there is only a finite amount of that resource. Furthermore, many of these resource limits are things we are either already bumping into, or things that we will bump into in the foreseeable future, such as in the case of the various natural resources we've come to rely on.
Parent
Creating value - super simple example (Score:4, Insightful)
Value can only be created by consuming resources. Whether that resource is energy, or some natural resource such as coal or iron, or human labor, etc, there is only a finite amount of that resource.
Wrong.
Simplified example: Let us assume you require 2 tons of rock to build a home. Then somebody teach you to build a better home from 1 ton of rock.
Now you have 1 spare ton of rock and a better home. Obviously, we have created value.
Economics is not about measuring the total amount of resources on earth. In the end, it is about efficiency, trading work and resources to always make more efficient use of resources.
Improved efficiency = Satisfying needs of more people with the same amount of resources = value.
Parent
Psychonomics (Score:3, Interesting)
But economics is not a zero-sum game. I give you $150 and you give me an hour of labor. We've both benefited by the trade.
In all but the world's oldest profession, I'm inclined to disagree.
Here's one:
Person A runs a tavern. Person B (after a few beers) drives his car into that of Person A. Person B pays $150 to Person C to fix the scratches on Person A's car. Person C uses his $150 income at Person A's tavern.
Who profited by the exchange of $150? Are all three people better off?
Here's another: Person
Re: (Score:3, Insightful)
I think in all but the most ideal circumstances, it is indeed zero-sum game.
I think it should be palpably obvious that the obvious is true, from a simple examination of the world around you, and of history. If the economy (let's use the right term, economics is an area of study) of the world as a whole is a zero sum game, then wealth in the world could not consistently increase. And yet, for 100's of years, wealth has consistently increased, and has done so for virtually everyone in most economies. The
Re: (Score:3, Insightful)
It's still a zero sum game in terms of the resources. Pretending it's not is exactly why the economic system is so damn broken.
That's not a useful way to look at an economic system. My value and whether I can fulfill my desires is not a function of how many tons of tin I use up or slaves I control. Plus, it's worth mentioning that we have more resources now than we did a century ago. Our knowledge (a typical good that doesn't depend on available resources) has grown allowing us to access resources that we couldn't access earlier.
Re:The problem is not an efficient algorithm (Score:5, Informative)
Well, I'm not surprised there is such school. My impression is, that economists in general don't have a good grasp of math, specifically, they don't seem to understand the exponential function, otherwise they would not speak of "growth" all the time. I'm not saying one should not take human behavior into account, but at least they should get the boundary conditions right, and one of those is that our resources are limited.
Your impression is wrong. Every economist knows about Thomas Robert Malthus [wikipedia.org] and Malthusian economics -- for the pre-industrial era his model best explains demographics and the limits of growth. It only so happened that just after he published his thoughts, the industrial revolution happened and technological progress pushed the boundaries of growth further and further - in an exponential manner.
Would you dare to make an exact forecast where the limits of growth lie? Limited by fossil fuels? Or a single planet's worth of solar energy? Maybe a Dyson sphere's worth of solar energy? Technological progress moves the goalposts rapidly enough that you have to assume exponential growth punctuated by occasional catastrophes - at least for the next 50 years.
Parent
Re: (Score:3, Insightful)
Fundamentally, Malthus was right. Exponential growth cannot continue indefinitely. At some point, resources will become limiting and exponential growth of human populations (and economies) will not be possible. The most extreme example of a limiting resource could be the number of atoms in the universe, but in practice, a realistic limit could very well end up being something as simple as oil.
Perhaps it is true that the assumption of constant exponential growth is a safe for the next one or few generati
Re: (Score:3, Interesting)
I don't think the biggest problem is economists' grasp of math. Rather, it's that (a) the people implementing the economists' mathematical theories don't have a good grasp of the math [wired.com], and (b) economists don't have a good grasp of the people their math is supposed to model [nytimes.com].
Re: (Score:3, Insightful)
Even Rothbard heavily criticized Friedman (not to mention Krugman et al).
Re: (Score:3, Informative)
Re:The problem is not an efficient algorithm (Score:5, Insightful)
I was about to say the same thing. Unlike poker, the rules of the games are altered based on the current knowledge about the state of the game. This means that as soon as someone proclaims "We know the rules of Economics!", someone else is going to look at those rules and either game them to their benefit, or rewrite them to better suit their own purpose.
Computer Scientists - and Economists - have a habit of assuming that they just need to find the proper model for human behavior, and all the problems will be solved. That's because that's how it works in a science: you assume the rules don't change in an arbitrary fashion. Humans, however, do. This makes any prediction of human behavior a statistical undertaking at best. Your success will be measured by how much better you compared to a random decision making process. At worst, the statistical anomaly completely wrecks your model - see the Black Swan Theory in Economics.
Parent
Re: (Score:3, Insightful)
Computer Scientists - and Economists - have a habit of assuming that they just need to find the proper model for human behavior, and all the problems will be solved.
There are two problems with that statement. First, that's not how computer scientists and economists work. Second, even if they did, how do you know they would be wrong in that assumption? I ignore here the laziness of claiming that economists would consider a mathematical model of human behavior a solution to "all" problems, including completely unrelated problem like opening a stiff door or how to wash the small of one's back while in the shower.
Not quite... (Score:3, Insightful)
No, I'd say that we're dealing here with two facets of the same problem: the unreality of Homo economicus. The classic objection to economic theory is that people don't act "rationally" in the sense that economic theory requires them
Re: (Score:3, Interesting)
I agree wit
Re: (Score:3, Insightful)
I'm sure it's great to repeat cliche lines when it comes to economics and computer science, and I know it's super popular with the recent quant economics and stock market debacle. But it'd be kind of nice if people knew what a Nash equilibrium is in the first place. If I use a Nash equilibrium strategy, it doesn't matter *how* you change your behaviour, you can't benefit from it. Think minimax algorithm in zero-sum games.
This is a perfectly sound mathematical concept, in a mathematical sense it's as true as
Hayek (Score:5, Insightful)
Hayek [wikipedia.org] showed that about 50 years ago:
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." (The Fatal Conceit, p. 76)
Unfortunately, there is a lot of designing going on right now.
Re:Hayek (Score:5, Informative)
And his teacher, Mises, before him in his work Human Action devoted an entire section of that massive tome to just this very topic: that humans are not equations.
From said tome:
No laboratory experiments can be performed with regard to human action. We are never in a position to observe the change in one element only, all other conditions of the event remaining unchanged. Historical experience as an experience of complex phenomena does not provide us with facts in the sense in which the natural sciences employ this term to signify isolated events tested in experiments. The information conveyed by historical experience cannot be used as building material for the construction of theories and the prediction of future events. Every historical experience is open to various interpretations, and is in fact interpreted in different ways.
The postulates of positivism and kindred schools of metaphysics are therefore illusory. It is impossible to reform the sciences of human action according to the pattern of physics and the other natural sciences. There is no means to establish an a posteriori theory of human conduct and social events. History can neither prove nor disprove any general statement in the manner in which the natural sciences accept or reject a hypothesis on the ground of laboratory experiments. Neither experimental verification nor experimental falsification of a general proposition is possible in its field.
Parent
Re:Hayek (Score:5, Informative)
No laboratory experiments can be performed with regard to human action.
One of the most profoundly stupid statements ever uttered by an economist. Sure you can't stick the global economy in a beaker and have controls and the other paraphernalia of controlled lab tests, the highest standard of science. But you can experiment with human action at the individual or small group in a controlled lab. It's routinely done these days. There is such a thing as experimental verification and falsification.
Parent
another intersection of CS and econ (Score:5, Interesting)
Here's a proof that detecting "toxic assets" is impossible [dailykos.com] (or at least NP)
Re: (Score:3, Interesting)
Its easy! (Score:5, Funny)
Meaning if you can generalize the solution to poker, you have the ability to discover the Nash equilibrium of the economy
The general solution to poker is to end the game with everyone elses money to make yourself richer. Some people have already applied this strategy to the economy.
Only works with real money (Score:5, Insightful)
Once you factor debt and fractional reserves into the picture, the game changes quite a bit. The current crisis is that the players bet WAY more than they had, and they are all afraid to call, since they secretly know that EVERYBODY is bluffing. So the game (and the stock market) keeps going up as the players trying to outbluff each other with "I'll see your billion and raise you three more". And it will keep going up until somebody has to actually put something of value in the pot.
Parent
Re: (Score:3, Interesting)
Re: (Score:3, Insightful)
As long as people are allowed to keep extraordinary profits, the motivation is there to game whatever system is in place and this leads to a neverending race. Only strong levels of taxation (where by strong, I mean 95% taxation on all forms of personal income above a certain threshold, eg 200k) can make people
Obligatory (Score:5, Insightful)
Economics involves people. So...
"To summarize the summary of the summary: people are a problem." - Douglas Adams
Re:Obligatory (Score:4, Funny)
I think that Stalin said that this problem is fixable...
Parent
Article misrepresents complexity theory (Score:3)
Wikipedia's Altered Theory of Computation (Score:3, Funny)
Now would be a GREAT time to go alter the wikipedia articles on NP completeness and such, then watch the aftermath on slashdot as the n00bs go do their research and learn what it is for the first time!
Nice setup (Score:5, Funny)
What can CS teach ECON?
How to crash routinely and have people shrug it off as normal.
So, this economist and... (Score:3, Insightful)
So, this economist and a computer scientist are sitting at a bar.... and these 5 girls walk in....
Re: (Score:3, Funny)
Misses the post-scarcity point; digital abundance (Score:3, Interesting)
The biggest problem we face is post-scarcity technologies of abundance wielded by scarcity-obsessed people, because things like biotech, robotech, infotech, nanotech, nucleartech, and so on make terrible, if ironic, weapons. It is ironic to use military robots to fight over economic issues the robots make obsolete. It is ironic to use nuclear missiles built with advanced materials to fight over oil supplies that nuclear power or solar energy make unimportant. It even takes more electricity to produce a gallon of gasoline than an electric car takes to go the same distance, if you really want some deep irony -- we'd use less electricity if we switched to electric cars. So, as an example of post-scarcity thinking, considering that and safety issues, our society would save money and have lower taxes if everyone got a free-to-the user safe luxury electric car.
http://groups.google.com/group/openmanufacturing/msg/09eb7f4c973349f2?hl=en [google.com]
From Post-scarcity Princeton:
http://www.pdfernhout.net/post-scarcity-princeton.html [pdfernhout.net]
"""
* Some comments on the PU Economics department and related research directions from a post-scarcity perspective
The PU economics department, of course, should be abolished as part of this transition. :-)
OK, that will never happen, so it should be at least "strongly admonished" for past misbehavior. :-(
What misbehavior? Essentially, the PU Economics department has taken part in a global effort to build an economic "psychofrakulator". How does a psychofrakulator work? Consider a paraphrase of something Doc Heller says in the movie Mystery Men:
http://www.imdb.com/title/tt0132347/quotes [imdb.com]
Dr. Heller: It's a psychofrakulator. They used to say it couldn't be built. The equations were so complex that most of the scientists that worked on it wound up in the insane asylum [in Chicago]. ... It creates a cloud of [dollar denomiated] radically-fluctuating free-deviant chaotrons which penetrate the synaptic relays [via television]. It's concatenated with a synchronous transport switch [of values from long term seven generation life-affirming love of caring to short-term immediate profit and immediate gratification suicidal death-affirming love of money] that creates a virtual tributary [back to large corporations]. It's focused onto a biobolic reflector [of the elite controlled mass media] and what happens is that [economic] hallucinations become reality and the [global] brain [and global ecosystem] is literally fried from within.
Or in other words:
"Screwed: What 30 Years of Conservative Economics Feels Like"
http://granby01033.blogspot.com/2008/04/screwed-what-30-years-of-conservative.html [blogspot.com]
Or:
http://en.wikipedia.org/wiki/Post-autistic_economics [wikipedia.org]
And:
"Obituary: Conservative Economic Policy"
http://tpmcafe.talkingpointsmemo.com/2007/10/19/obituary_conservative_economic/ [talkingpointsmemo.com]
Conservative economic policy is dead. It committed suicide. Its allegiance to market solutions, tax cuts and spending cuts, supply-side nonsense, manipulative and corrosive ties to industry and the rich, have left it wholly unable to cope with the challenges we face. Its terribly limited toolbox simply cannot address the economic insecurities and opportunities generated by today's global, interconnected, polluted, insecure, dyna
Open Source (Score:3, Interesting)
Well, one thing they could learn from open source is that it can be rewarding to forgo profits altogether. Now that WOULD be a revolution.
Re:No shit (Score:4, Insightful)
That's why the goal [wikipedia.org] is to dumb down the average person and limit his choices until we're at the level of a THX 1138/Brave New World society.
Parent
Re: (Score:3, Informative)
Don't be shocked, the MIT article doesn't even get the simple example of game theory right:
Re: (Score:3, Insightful)
And the best strategy for the shooter is to place the ball in the corner where the goalie can't reach it even if guesses the right side. The only problem with this strategy is that it increases the risk of missing the goal entirely, which not only losses the 50-50 chance but is also extremely embarrassing. So the optimal strategy is only valid for really good shooters.
And we are not even covering the options of feints, but game theory of feints gets silly. Is is feinting for real or is he feinting to make m
Re: (Score:3, Informative)
Not so. There is a reason this class of problems is called "non-deterministic". That is because there is no way to determine, ahead of time, whether a finite solution for this problem exists!
No, that's just wrong. The problems are called non-deterministic polynomial (NP) because they can be solved in polynomial time by a non-deterministic turing machine. A non-deterministic turing machine is a turing machine that can take go into multiple states and accepts an input if any of it's states end up leading to an accept state. Think superposition of states with a wave collapse if you're a physicist.
All of these problems have finite solutions and in fact one of the requirements is that a NP proble
Wait a minute (Score:3, Insightful)
Poker is a game?
Re: (Score:3, Funny)
If all else fails, at least we can still exchange a few funny stories about crashes...
Fail to see the big deal (Score:3, Informative)
I have graduate degrees in both Computer Science and Economics and this commonality was so obvious to me over a decade ago that it wouldn't have seemed worth writing about. Hell, you even study Von Neumann in both of these fields at the undergraduate level.
Re:Fail to see the big deal (Score:4, Funny)
Proof by obviousness isn't accepted by most peer-reviewed journals.
Parent
Re: (Score:3, Interesting)
Just because it can't make perfect predictions all of the time doesn't mean that it is useless. You're right, people aren't rational and random chance plays into most things. If you ever take an Econometrics class, you'll learn that predictive Econometric equations always include a random error variable.
Furthermore, in your example, I don't think that showing that people don't take the most selfish path is a "useless" finding. What they did was generate data about how people usually behave. Concepts from Ps