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What Computer Science Can Teach Economics 421

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."
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What Computer Science Can Teach Economics

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  • by iamacat ( 583406 ) on Monday November 09, 2009 @06:18PM (#30039216)

    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.

    • by GigsVT ( 208848 ) on Monday November 09, 2009 @06:24PM (#30039316) Journal

      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.

      • 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.

        • by icebike ( 68054 )

          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.

          And of course, the marketplace is the best engine for measuring said probability.

          Trying to use game theory to evaluate the behavior of people in an attempt to explain the behavior of the market is, at best, some sort of first or second derivative approach.

        • by astar ( 203020 )

          Well, you said probable. But I paid top dollar for a bunch of buggy whips. Know any buyers?

          The point here is that new tech devalues old tech.

          Anyway, on past (distance past) interactions in the market, I should be to find a buyer. If nothing else, I should be able to rely on the bigger fool theory like eveyone else. Then again, that has not worked out so well lately. But there is always the government to bail me out.

        • by sjames ( 1099 )

          Pet Rock, Hula Hoop, Mood Ring...

          The large scale aspects can be modeled but the confidence can never be 100%. Smaller scale movements might as well be quantum foam. Something like the uncertainty principle will likely be in play somewhere as well.

      • 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

      • A centralized model can't react in real time to factors that change by the minute or by the second like human actors can.

        That's false, I think. If you already have the algorithm, and the same access to data that the human actors have, then the model is faster than the human actors... provided you have the computational equipment. Humans need to execute decisions, which can take far longer than a sufficiently powerful computer.

        The problem is that it'd take trillions or more years to arrive at the Nash eq

      • well, causation is something that can be easily predicted up to a margin, but the rest of this, not so much.

      • by j1mmy ( 43634 )

        actually, it has nothing to do with reaction time. you hinted at the correct issue: desirability

        you can program a computer to model desirability within an economic actor, but it will never be more than a simplified model of the real thing. the possibility for tangential expansion of error is enormous.

      • What you are really saying is, in other words, is that money can never be really accurate, and it follows that the trend towards globalization and consolidation of currencies is a mistake. This makes some intuitive sense. If Japanese cars are better than American cars, then why do they cost more in America?

      • by astar ( 203020 )

        A central model is not the problem. This result has a bit of generality. Or emergent intelligence of the market, if such a thing exists. But you might want to criticize equilibrium assumptions or even axiom based systems.

      • by naasking ( 94116 )

        No formula can ever quantify that value. It's subjective.

        Ridiculous. Modeling aggregate behaviour is perfectly reasonable. How do you think quantum mechanics works? We can't precisely model individual particle characteristics, but aggregate behaviour can be studied to remarkable precision. At the moment, quantum mechanics is one of the most precise scientific theories of all time.

      • The problem is that the model of the market is part of the market. Therefore the correct model could only be true for a brief period, if at all. Any model will become a subset of a new model ... ad infinitum. However, it is an interesting result nonetheless.

    • by zach_the_lizard ( 1317619 ) on Monday November 09, 2009 @06:26PM (#30039348)
      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.
      • by gerddie ( 173963 ) on Monday November 09, 2009 @06:41PM (#30039514)

        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.

        • by Red Flayer ( 890720 ) on Monday November 09, 2009 @07:13PM (#30039808) Journal

          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.

          • Bullshit! (Score:4, Insightful)

            by Anonymous Coward on Monday November 09, 2009 @08:02PM (#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.

            • All the complex work that these economists have done seems impressive, yet it will crumble because they built it upon delusion.

              We have come to the end game of the infinite growth charade. The simple truth is that calling the valueless valuable does not really make it valuable, and nothing can change that.

            • by PMBjornerud ( 947233 ) on Tuesday November 10, 2009 @06:02AM (#30043660)

              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.

          • That does not mean that additional wealth cannot be created without infusion of additional resources.

            Rather too many negatives there. But you still can't create infinite wealth from finite resources. Something, somewhere - laws of thermodynamics, rarity of some resource - sets a limit on what you can create.

          • Psychonomics (Score:3, Interesting)

            by woolio ( 927141 )

            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

        • by Marcika ( 1003625 ) on Monday November 09, 2009 @07:18PM (#30039874)

          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.

          • Re: (Score:3, Insightful)

            by Grym ( 725290 )

            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

        • 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.

          But those limits are not so easily fixed or defined.

          The microchip is the perfect example.

          It doesn't exist before 1958. It's economic, technological and social impact scarcely felt before the 1980s.

        • Re: (Score:3, Interesting)

          by yali ( 209015 )

          My impression is, that economists in general don't have a good grasp of math

          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].

      • Is that a "school" or a couple ranting old kooks?

        • One of them won a Nobel prize, so I'd have to say they're not totally crazy.
          • Re: (Score:3, Insightful)

            by Red Flayer ( 890720 )
            FWIW... just because someone was awarded a Nobel Prize doesn't make their ideas inviolate.

            Even Rothbard heavily criticized Friedman (not to mention Krugman et al).
            • Re: (Score:3, Informative)

              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.
    • by NeutronCowboy ( 896098 ) on Monday November 09, 2009 @06:29PM (#30039370)

      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.

      • 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.

        Which means that economists will always have a profession, and more concretely, a job. Now THAT's job security (just talk to any humanities scholar going up for tenure)...

      • 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.

        So really economics is best modeled as mutating finite automata, with the economist being an actor in the simulation. Maybe Steven Wolfram was onto someth

      • I have heard similar arguments about applying metrics to the management of software development. This is the scenario where you set a standard of 100 lines of code per day or 0.5 bugs per hour or something, then evaluate engineers against it.

        Once the algorithm is known the engineers just work around it.

      • by mishehu ( 712452 )
        Hmmm this make it seems like Economics is more in line with Quantum Mechanics than with simple NP equations... Once you're observed the system, you've changed it.
      • 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.

        So what you're saying is that it's really just Calvinball.

      • 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.

        I am not an economist, so I cannot speak for the economists out there, but I am a computer scientist (my BS degree is in CS for whatever that is worth) so I can speak for myself as a computer scientist. In this regard I would say that many computer scientists are interested not in modeling human behavior per se, but rather understanding the limits of what can be accurately modeled or computed and to what margin of error. That is why we study the computational complexity and classes of problems which can be

      • Re: (Score:3, Insightful)

        by khallow ( 566160 )

        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

      • Re: (Score:3, Interesting)

        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 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

    • 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.

      Despite popular belief, scientists are usually not stupid. Have you considered the possibility that maybe one or two of them through the centuries have gone through this train of thoughs before?

      If my memory serves me, a Nash equilibrium is roughly defined as a state where no single player has any particular incentive to change their strategy - that means that if you change your strategy you loose more money. These states are considered important because if people somhow discover strategies corresponding to

  • Hayek (Score:5, Insightful)

    by homer_s ( 799572 ) on Monday November 09, 2009 @06:20PM (#30039248)
    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.
    • Re:Hayek (Score:5, Informative)

      by zach_the_lizard ( 1317619 ) on Monday November 09, 2009 @06:34PM (#30039424)

      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.

      • Re:Hayek (Score:5, Informative)

        by khallow ( 566160 ) on Monday November 09, 2009 @09:52PM (#30041344)

        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.

  • NP is O( (n^2) * log(n) )
  • by WhiteDragon ( 4556 ) on Monday November 09, 2009 @06:23PM (#30039300) Homepage Journal

    Here's a proof that detecting "toxic assets" is impossible [dailykos.com] (or at least NP)

    • Re: (Score:3, Interesting)

      by cananian ( 73735 )
      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
    • Someone, somewhere, is going to use this to fuck us all in the financial sector. And not in the good way. And by "financial sector" I mean unlubed arsehole with a cactus.

  • Its easy! (Score:5, Funny)

    by Monkeedude1212 ( 1560403 ) on Monday November 09, 2009 @06:23PM (#30039306) Journal

    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.

    • by Chemisor ( 97276 ) on Monday November 09, 2009 @06:47PM (#30039574)

      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.

      • Re: (Score:3, Interesting)

        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,
        • Re: (Score:3, Insightful)

          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

  • Obligatory (Score:5, Insightful)

    by Yvan256 ( 722131 ) on Monday November 09, 2009 @06:25PM (#30039338) Homepage Journal

    Economics involves people. So...

    "To summarize the summary of the summary: people are a problem." - Douglas Adams

  • by kramer2718 ( 598033 ) on Monday November 09, 2009 @06:37PM (#30039458) Homepage
    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.
  • There was a short article in t'Economist recently. The difference is that in poker, there's a finite set of outcomes - you can't have a hand that has both the pi of jodhpurs and the duke of pretzels in it. In economics, unforeseen and even unforeseeable situations can and do occur.
  • by Halotron1 ( 1604209 ) on Monday November 09, 2009 @06:45PM (#30039552)

    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)

    by istartedi ( 132515 ) on Monday November 09, 2009 @06:55PM (#30039646) Journal

    What can CS teach ECON?

    How to crash routinely and have people shrug it off as normal.

  • by fintler ( 140604 ) on Monday November 09, 2009 @06:58PM (#30039674)

    So, this economist and a computer scientist are sitting at a bar.... and these 5 girls walk in....

  • The problem with economics is the act of constructing a model changes reality. As soon as you take action based on your model, your model (and your actions) now become inputs to the system. You're doomed to forever chase a moving target, the more perfect the model the faster it becomes irrelevant. At best you can take some low hanging fruit with statistics preying on the ignorance of those less sophisticated. Goldman Sachs and the other HFT banks have this approach down to a science with the day trading cr
  • ummm (Score:2, Insightful)

    by nomadic ( 141991 )
    Some computer scientists are calling this the biggest development in game theory in a decade."

    Computer scientists and economists? What about the actual mathematicians?
  • I am pleased to see this result. It agrees with some of my own suspicions. Let me describe a simple three person game (players A, B, and C). Here is the rule for each player when it is their turn.

    A player must take $1.00 away from one opponent and give at least half of it to the other opponent. Whatever is not given to the other opponent can be kept by the acting player.

    Each player in turn gets to choose which player to steal a $1.00 from and how much of it they will keep (they can keep at most half) and ho

    • I have more to say. I forgot to mention another reason why I think this result is so exciting.

      Assume you have a game being played by N people (N > 2, but think of N > 8 as a typical example). By what I said in the prior post, everybody is playing a BAD strategy, a strategy that is far from the Nash Equilibrium because it is IMPOSSIBLE to effectively calculate a better strategy in a reasonable amount of time.

      Although it is impossible to create a perfect strategy, it is possible to create an exploiting

  • The implications of such a result are overstated:

    * It's easy to construct markets in which finding the optimal solution is NP-hard, and many real-world problems are already of that form--for example, any economic decision that involves an NP-hard optimization problem.

    * Participants already don't find optimal solutions even given infinite computational resources simply because people lack the necessary information to find optimal solutions to begin with.

    * NP-hardness is nearly useless in characterizing the d

  • by Paul Fernhout ( 109597 ) on Monday November 09, 2009 @07:55PM (#30040332) Homepage

    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, dynamic, bubble-prone economy. ...

    And any economists who don't want to move to, say, Chicago should be asked to follow this twelve step program: :-)
            "Confessions of a Recovering Economist" by Jim Stanford
            http://www.zmag.org/content/showarticle.cfm?SectionID=37&ItemID=3996 [zmag.org]

            Good evening. My name is Jim. And I am an economist. It is seventeen days since I last uttered the phrase "supply and demand." But the demon still lurks, untamed, within me. ...

            Every other addiction has a Twelve Step program, laced with tough love and blunt self-honesty. Why not a Twelve Step program for economists? God knows, they've done enough damage with their arrogant, drunken prescriptions. Here's how each and every economist can face up to their inner demons, and make their own small contribution to setting things right.

            Step 1: Admit you have a problem. Like they say at the AA meetings, this is half the solution. Where economists are concerned, however, it's easier said than done. Getting a substance abuser to face the facts of their addiction is nothing compared to convincing an economist that they're hooked on elegant but useless mathematical models, and authoritative but destructive policy advice. Where economists are concerned, we're talking denial with a capital 'D.'

            Step 2: Accept that all your efforts to explain the world have failed. The 'market' is the holiest symbol in all of economics. It's magically automatic and efficient. And supply always equals demand. The whole profession of mainstream, 'neoclassical' economics is dedicated to the study of markets and how they can be perfected. The problem, however, is that in real life these idealized 'markets' don't explain much at all. Powerful non-market forces determine most of what happens in the economy - things like tradition, demographics, class, gender and race, geography, and institutions. Indeed, what we call the 'market' is itself a complex, historically constructed social institution - not some autonomous, inanimate forum. Power and position are at least as important to economics, as supply and demand. ...

    But I'm mainly using the PU economics department as a stand-in for the problems our world faces and past misdeeds of all economists, which is not really fair, I know; I'm not in any way expert on their current research. A few of the faculty, even twenty years ago, may well have been concerned about some of these issues. The closest I came to the PU economics department was rooming with a PU Economics graduate student for a time during the summer after I left the graduate college and he was one of the most fun people I ever met and he was interested in global issues. We became friends. But, beyond the troubles I saw him have finding an advisor, I saw this clever and witty fellow beaten down over the years as we stayed in touch, even to the point of divorce as he was forced to sacrifice his marriage to a wonderful person for his PhD (though granted, he could have abandoned his degree). To me, that sums up what the PU Economics department has really been about -- numbers and credentials instead of joy and family. The department may well have improved some over the last two decades. Still, at the very least, the PU Economics department faculty should be admonished for not writing the post-scarcity part of this essay instead of me (with my baggage. :-) Obviously, as with Paul Krugman, there are some partial exceptions who maybe should perhaps be admonished double for raising our hopes? :-)
            http://en.wikipedia.org/wiki/Paul_Krugman [wikipedia.org]
    To my knowledge, none of them look at the actual issue of the nature of work:
            http://www.google.com/search?hl=en&q=site:www.econ.princeton.edu+work+nature [google.com]
            "Results 1 - 10 of about 19 from www.econ.princeton.edu for work nature. (0.12 seconds) [None relevant]"
            http://www.google.com/search?hl=en&q=site%3Awww.econ.princeton.edu+%22why+work%22 [google.com]
            "Your search - site:www.econ.princeton.edu "why work" - did not match any documents."
    like Bob Black raises:
                    http://www.google.com/search?hl=en&q=site%3Awww.econ.princeton.edu+%22bob+black%22 [google.com]
                    "Your search - site:www.econ.princeton.edu "bob black" - did not match any documents."
    Again, from Bob Black:
                http://www.whywork.org/rethinking/whywork/abolition.html [whywork.org]

            Clearly these ideology-mongers have serious differences over how to divvy up the spoils of power. Just as clearly, none of them have any objection to power as such and all of them want to keep us working.

    OK, maybe Bob Black is less known, but what about E.F. Schumacher and Buddhist Economics?
            http://www.google.com/search?hl=en&q=site%3Awww.econ.princeton.edu+schumacher [google.com]
            "Your search - site:www.econ.princeton.edu schumacher - did not match any documents."
    From Schumacher:
            http://www.smallisbeautiful.org/buddhist_economics/english.html [smallisbeautiful.org]

            Economists themselves, like most specialists, normally suffer from a kind of metaphysical blindness, assuming that theirs is a science of absolute and invariable truths, without any presuppositions. Some go as far as to claim that economic laws are as free from "metaphysics" or "values" as the law of gravitation. We need not, however, get involved in arguments of methodology. Instead, let us take some fundamentals and see what they look like when viewed by a modern economist and a Buddhist economist.

    Should the PU economics department wish to stay intact rather than move en masse to another university, the calculus of infinites mentioned at the start of this essay is one new direction for their research and teaching.

    But, if PU economists still want to make charts and theories about finite things (they're good at that, obviously, and it is labor that they seem to love to do, see Schumacher :-), then what they need to start looking at and charting are physical concepts like Ray Kurzweil considers here:
            "The Law of Accelerating Returns"
            http://www.kurzweilai.net/articles/art0134.html [kurzweilai.net]
    PU economists could graph historical trends over time like:
    * increasing computation delivered per unit mass of silicon,
    * the increasing amount of freely licensed software and other content,
    * the increasing percentage of human attention devoted to free content,
    * the increasing electrical energy captured per unit mass for windmills,
    * the increasing incarceration rate per capita in the USA,
    * the decreasing amount of time it takes a solar collector to repay the energy used in its manufacture,
    * the decreasing ground crew size per space rocket launch,
    * the decreasing topsoil depth per capita,
    * the decreasing global biodiversity, and so on.
    Obviously, they'd also want to look at other things at websites like this for more ideas:
            "Redefining Progress: Shifting public policy to achieve a sustainable economy, a healthy environment and a just society"
            http://www.rprogress.org/index.htm [rprogress.org]

    Like Kurzweil, PU economists could start applying their skills to charting trends in the real basis of prosperity. They need to move beyond charting derived trends that are social constructions like fluctuations in fiat currency. They need to start admitting that as a fiat currency system breaks down with a transition to the emerging post-scarcity economy, dollars are no longer a very good way to measure things (if they ever were). They need to remember that currency is as arbitrary system related to a current economic control system which is rapidly becoming obsolete. Fiat dollars are essentially ration units, and rationing is becoming obsolete as part of the emerging post-scarcity society. For example, personal internet bandwidth use and server disk space are now so cheap as to be effectively "too cheap to matter" except in the most extreme cases for some small number of individuals. So, PU economists need to get back to basics and start charting real physically measurable (or estimateable) things. And then they need to think about the interrelations of those real things. Essentially, they can still use a lot of their old skills at analysis, but rather than apply them to one thing, money, they need to apply them to thousands of individual measurements of aspects of life-support and production. And the challenge will be in seeing how to make predictions about systems where these thousands of factors are difficult to interchange for each other (for example, topsoil depth versus sewing machine production).

    The historic focus of PU economists on charting changes in social constructions (fiat dollars) instead of changes in technological capacity that is one cause of PU economists failing to predict a post-scarcity society. It is no surprise it took someone like Ray Kurzweil to be able to handle both the mathematical content and the technological content to provide his analysis of the timing of a post-scarcity transition (or even broader singularity). However, just because Kurzweil is good at seeing the trends leading up to a singularity in our society, does not mean that he can see beyond it (and he admits this). So it is important to understand that the policy proposals Kurzweil suggests come out of his own longstanding conservative/libertarian financial perspective as a self-made technology millionaire. The exact shape of a future society in terms of what core priorities and values it reflects is still up in the air, and may well be very different then the propertarian approach Kurzweil assumes:
            http://en.wikipedia.org/wiki/Propertarianism [wikipedia.org]
    as opposed to, say, libertarian socialism:
            http://en.wikipedia.org/wiki/Libertarian_socialists [wikipedia.org]
    or something else much broader as a gift economy:
            http://en.wikipedia.org/wiki/Gift_economy [wikipedia.org]
    or something much narrower as an internet mediated central planning like Chile's Cybersyn pioneered in the 1970s:
            http://en.wikipedia.org/wiki/Cybersyn [wikipedia.org]
    There could be a fruitful interdisciplinary collaboration between PU economists with their charting skills for historical trends and PU engineers with their technical knowledge of what physical characteristics of systems are important to production.

    In general, economists need to look at what are major sources of *real* cost as opposed to *fiat* cost in producing anything. Only then can one make a complete control system to manage resources within those real limits, perhaps using arbitrary fiat dollars as part of a rationing process to keep within the real limits and meet social objectives (or perhaps not, if the cost of enforcing rationing for some things like, say, home energy use or internet bandwidth exceeds the benefits).

    Here is a sample meta-theoretical framework PU economists no doubt could vastly improve on if they turned their minds to it. Consider three levels of nested perspectives on the same economic reality -- physical items, decision makers, and emergent properties of decision maker interactions. (Three levels of being or consciousness is a common theme in philosophical writings, usually rock, plant, and animal, or plant, animal, and human.)

    At a first level of perspective, the world we live in at any point in time can be considered to have physical content like land or tools or fusion reactors like the sun, energy flows like photons from the sun or electrons from lightning or in circuits, informational patterns like web page content or distributed language knowledge, and active regulating processes (including triggers, amplifiers, and feedback loops) built on the previous three types of things (physicality, energy flow, and informational patterns) embodied in living creatures, bi-metallic strip thermostats, or computer programs running on computer hardware.

    One can think of a second perspective on the first comprehensive one by picking out only the decision makers like bi-metallic strips in thermostats, computer programs running on computers, and personalities embodied in people and maybe someday robots or supercomputers, and looking at their characteristics as individual decision makers.

    One can then think of a third level of perspective on the second where decision makers may invent theories about how to control each other using various approaches like internet communication standards, ration unit tokens like fiat dollars, physical kanban tokens, narratives in emails, and so on. What the most useful theories are for controlling groups of decision makers is an interesting question, but I will not explore it in depth. But I will pointing out that complex system dynamics at this third level of perspective can emerge whether control involves fiat dollars, "kanban" tokens, centralized or distributed optimization based on perceived or predicted demand patterns, human-to-human discussions, something else entirely, or a diverse collection of all these things. And I will also point out that one should never confuse the reality of the physical system being controlled for the control signals (money, spoken words, kanban cards, internet packet contents, etc.) being passed around in the control system.

    The above is somewhat inspired by "cybernetics".
            http://en.wikipedia.org/wiki/Cybernetics [wikipedia.org]
    So, I'd suggest, should the PU Economics Department faculty be kept on, the department should be renamed the "Princeton University Cybernetics Department" with there being an "historical economics" subsection all the current economics faculty are assigned to, and one faculty member each from the PU Department of Religion, the PU Department of History, and the PU department of Mechanical and Aerospace Engineering be put in as an acting team triumvirate leadership of the larger department. :-) As economics faculty broaden their research, then they could move into other new Cybernetics department sections. See also:
            "The Human Use Of Human Beings: Cybernetics And Society" by Norbert Wiener
            http://www.amazon.com/Human-Use-Beings-Cybernetics-Paperback/dp/0306803208 [amazon.com]

    What is more pressing in understanding a post-scarcity economy is seeing what real physical limits exist currently and how they could change over time. This requires examining physical production from first principles, since only when one understands the physical limits of a system does a discussion of various control systems and their strengths and weaknesses make sense.

    The essentials to producing anything in general are:
    * Human time (or other decision making time)
    * Energy
    * Raw Materials
    * Tooling
    * Transportation
    Plus there is maybe the effort involved in cleaning up environmental or social damage. In classical economics there is also "rent" for access to money or land or copyrights or patents and so on, but for the sake of a physical analysis we can ignore that because rent is an arbitrary social construction related to rationing, and so is a higher level concept.

    On replacing human time with computers and automation in a couple decades, see, for background:
            "Kurzweil says, by the 2020s we'll be ... building machines as smart as ourselves."
            http://science.slashdot.org/article.pl?sid=08/06/04/1213237 [slashdot.org]
    And to see what is happening right now:
            "Supercomputer Simulates Human Visual System"
            http://tech.slashdot.org/article.pl?sid=08/06/13/2014225 [slashdot.org]

            What cool things can be done with the 100,000+ cores of the first petaflop supercomputer, the Roadrunner, that were impossible to do before? Because our brain is massively parallel, with a relatively small amount of communication over long distances, and is made of unreliable, imprecise components, it's quite easy to simulate large chunks of it on supercomputers. The Roadrunner has been up only for about a week, and researchers from Los Alamos National Lab are already reporting inaugural simulations of the human visual system, aiming to produce a machine that can see and interpret as well as a human. After examining the results, the researchers 'believe they can study in real time the entire human visual cortex.' How long until we can simulate the entire brain?

    It's amazing to me how quickly sci-fi supposedly set in the 24th century is becoming reality:
            "Star Trek TNG: The Game (episode)"
            http://memory-alpha.org/en/wiki/The_Game [memory-alpha.org]

            Wesley and Robin investigate the [video game] device in sickbay, [using a computer simulation of the human visual system and other brain systems] and determine that it has a psychotropically addictive side-effect, and that it stimulates increased serotonin production. Most worryingly, it also stimulates the brain's higher reasoning area.

    And it doesn't take human level AI or vision to do the kind of things ants can do -- gather materials and process them chemically. So we will see big changes before human AI, even if human level AI for some reason was impossible or undesirable.

    Looking at things from this perspective, how can everything become free as computer costs decrease? Well, if you use robotics and automation, the human time goes away as a necessity. If human-equivalent time is free, then there is no human time cost to the other items as well. So, say for energy, with free labor, you only need the other categories to make more energy producing equipment, at which point you have all the free energy you want. So, with free labor and free energy, to get free raw materials all you need is tooling and transportation. And with free labor, energy, and raw materials, you get tooling if you you have transportation, But with free labor, energy, raw materials, and tooling, then you have the ingredients for free transportation. And with free everything else, the robots and computers are free too. Ultimately, there are only two costs to anything -- labor and rent (ignoring the destruction of environmental capital). Since rent is societally determined, if labor is free (via computer driven robots) then everything can be free eventually. Granted, there are *physical* limits involving how fast you can do something with the robots or 3D printers on hand. Those physical time limits and their interdependencies are well worth studying by a new breed of post-scarcity economists. But in practice, if you look at nature, the long term limits are more like incident sunlight and our planet has tens of thousands times more incident sunlight then our current society would need if it was all electric. Most materials can be recycled and so do no pose limits. So as computing replaces labor, everything can eventually be "free", as long as physical capital is produced faster than it wears out or is consumed. No doubt many of the mathematical techniques economists have developed for thinking about imaginary things like fiat dollar return on investment may have some applicability to more complex models considering energy return on an investment of energy, or computational return on an investment of mass, or the sustainable yield of consumer product mass from a productive physical system with a certain target growth rate of mass and energy converted into robots given tooling wear, and so on. Here is a paper prototype of such an analysis system which considers tool wear in relation to expanding industrial capacity:
            http://www.kurtz-fernhout.com/oscomak/prototype.htm [kurtz-fernhout.com]
    """

    Also related
        "Why limited demand means joblessness (and what to do about it)"
        http://www.beyondajoblessrecovery.org/2009/10/03/why-limited-demand-means-joblessness/ [beyondajob...covery.org]
    "Summary: Mainstream economics assumes demand for almost anything is infinite. Thus, the theory goes, when human workers get replaced by robots, or better design means less human labor is needed, then there will soon be new jobs making new things; the only issue might be retraining. But, if demand is limited (because the best things in life are free or cheap, and everything you own also owns you), then when people get laid off, the jobs are gone for good, because there is nothing more that anybody wants then is already produced. And people having more time outside of compulsory work would be a good thing, if we more evenly shared the wealth from automation and better design, but we don't -- yet."

  • Don't put into kernel, what can be done in user space.

  • Open Source (Score:3, Interesting)

    by jandersen ( 462034 ) on Tuesday November 10, 2009 @02:33AM (#30042828)

    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.

  • WoW! (Score:3, Funny)

    by hesaigo999ca ( 786966 ) on Tuesday November 10, 2009 @09:43AM (#30044770) Homepage Journal

    I would love to see how this might be able to harness me some more gold while farming on WoW!

  • WOW (Score:3, Interesting)

    by DarthVain ( 724186 ) on Tuesday November 10, 2009 @11:40AM (#30046152)

    That is what the World of Warcraft should do:

    A) Allow players to go into debt
    B) Allow players to have credit
    C) Create things like derivatives that players can trade around.

    Would be interesting to see what happens and how they manage it. They could also try to have one AH across all the servers (likely technically problematic). They all ready have the numbers for a pretty grand experimental in virtual economics, the closer they model reality, the more interesting it would be to see how things react.

    • Re: (Score:3, Interesting)

      by blueg3 ( 192743 )

      WoW players have all the tools necessary to do this now, except one -- there are no effective tools to enforce player-created rules. You of course can't do anything to the players themselves, and there's almost nothing you can do to the characters. As such, people will simply borrow money and not pay it back. In the real world, this is fixable (though ugly).

Repel them. Repel them. Induce them to relinquish the spheroid. - Indiana University fans' chant for their perennially bad football team

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