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A simple system is one where at least one actor is sufficiently intelligent, knowledgeable and powerful to unilaterally alter the dynamics of the system based on a predictive model of what the system will do. Perhaps we might more meaningfully say that a system is simple or complex relative to a given actor if that actor has the capacity to unilaterally alter the system based on their understanding thereof. A complex system (a system complex relative to a given actor) is one where no actor can unilaterally alter the system based on their understanding thereof (though they may be able to alter their own place within the system).
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The mere existence of key agents, I argue, transforms the complex system into a simple one (for some players, for some purposes). Not that those key agents can act flawlessly, but rather, that their size and knowledge makes modeling the system impossible without taking into account their ability to alter whatever temporary rules seem to be evident. Investment banks may not have known all of the consequences of their actions in the mid-2000s, but they had a much better sense than the rest of us, and at least some of those actors (e.g. Goldman Sachs) were capable of timing the bubble to maximum advantage (or minimum disadvantage). The Fed responded in turn, guided by its own models (models here being both quantitative, econometric and structural models but also more heuristic or cultural models of how-things-generally-work). The financial collapse of 2007-2009 was at once a story of millions of individual actors slowly changing behaviors (home buyers and individual mortgage brokers) and the story of influential policy decisions by a handful of organizations. The latter part is not characteristic of a complex system but rather a simple one.
"As a student of epidemiology and economics I feel duty-bound to apply my cursory knowledge of statistics to the novel natural cohort presented in the Hunger Games novel, as documented by author Suzanne Collins. I present a Hunger Games survival analysis: in a Cox proportional hazards model, which covariates are associated with the odds (or hazard ratios) being ever in your favor? A taste of what’s to come:"
Critical transitions are sudden, often irreversible, changes that can occur in a large variety of complex systems; signals that warn of critical transitions are therefore highly desirable. We propose a new method for early warning signals that integrates multiple sources of information and data about the system through the framework of a generalized model. We demonstrate our proposed approach through several examples, including a previously published fisheries model. We regard our method as complementary to existing early warning signals, taking an approach of intermediate complexity between model-free approaches and fully parameterized simulations. One potential advantage of our approach is that, under appropriate conditions, it may reduce the amount of time series data required for a robust early warning signal.
"Game theory is the standard tool used to model strategic interactions in evolutionary biology and social science. Traditional game theory studies the equilibria of simple games. But is traditional game theory applicable if the game is complicated, and if not, what is? "
"That means one way to figure out whether mainstream economics makes sense is to see what the assumptions are, and to try to decide whether those assumptions make sense. For example, what were Samuelson’s assumptions? What were Arrow and Debreu’s assumptions?
Samuelson had one big assumption, that economists call ergodicity.
[Teacher pauses to give kids time to stumble over the word.]
When they say ergodicity, they mean that no matter what happens in the world, in the end, everything will reach a point whether things stop changing. That point is called the “equilibrium.” At the equilibrium, everyone will end up with a certain amount of money. The amount of money that everybody gets at the equilibrium depends on how talented they are, and not on anything that happened before. So if you rob a bank, it won’t matter because when you get to the equilibrium, if you’re stupid, you will still have the same amount of money you would have had if you didn’t rob the bank."
"With the prevalence of social networks, it has become increasingly important to understand their features and limitations. It has been observed that information spreads extremely fast in social networks. We study the performance of randomized rumor spreading protocols on graphs in the preferential attachment model. The well-known random phone call model of Karp et al. (FOCS 2000) is a push-pull strategy where in each round, each vertex chooses a random neighbor and exchanges information with it. We prove the following. - The push-pull strategy delivers a message to all nodes within Θ(log n) rounds with high probability. The best known bound so far was O(log2 n). - If we slightly modify the protocol so that contacts are chosen uniformly from all neighbors but the one contacted in the previous round, then this time reduces to Θ(log n / log log n), which is the diameter of the graph. This is the first time that a sublogarithmic broadcast time is proven for a natural setting. Also, this is the first time that avoiding double-contacts reduces the run-time to a smaller order of magnitude."
"This paper examines a fundamental problem in applied mathematics. How can one model the behavior of materials that display radically different, dominant behaviors at different length scales. Although we have good models for material behaviors at small and large scales, it is often hard to relate these scale-based models to one another."
Author of Personality:what makes you the way you are... "I am a behavioural scientist interested in applying ideas from ecology and evolution to human behaviour. I have worked on such topics as cooperation, reproductive decisions, parenting and families, personality, and health. My research uses theoretical modelling, as well as behavioural data from several countries, especially the UK. I"
"This paper develops the concepts and methods of a process we will call ldquoalignment of computational modelsrdquo or ldquodockingrdquo for short. Alignment is needed to determine whether two models can produce the same results, which in turn is the basis for critical experiments and for tests of whether one model can subsume another. We illustrate our concepts and methods using as a target a model of cultural transmission built by Axelrod. For comparison we use the Sugarscape model developed by Epstein and Axtell."
"Here we present a multi-step, physically based ‘probabilistic event attribution’ framework showing that it is very likely that global anthropogenic greenhouse gas emissions substantially increased the risk of flood occurrence in England and Wales in autumn 2000."
"Here we show that human-induced increases in greenhouse gases have contributed to the observed intensification of heavy precipitation events found over approximately two-thirds of data-covered parts of Northern Hemisphere land areas. These results are based on a comparison of observed and multi-model simulated changes in extreme precipitation over the latter half of the twentieth century analysed with an optimal fingerprinting technique. Changes in extreme precipitation projected by models, and thus the impacts of future changes in extreme precipitation, may be underestimated because models seem to underestimate the observed increase in heavy precipitation with warming."
But all the tools in the world are useless if we lack the imagination needed to build the right models. Models are built to answer specific questions.
in list: Economic Crisis
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We need to take a close look at how the sociology of our profession led to an outcome where people were made to feel embarrassed for even asking certain types of questions. People will always be passionate in defense of their life's work, so it's not the rhetoric itself that is of concern, the problem comes when factors such as ideology or control of journals and other outlets for the dissemination of research stand in the way of promising alternative lines of inquiry.
I don't know for sure the extent to which the ability of a small number of people in the field to control the academic discourse led to a concentration of power that stood in the way of alternative lines of investigation, or the extent to which the ideology that markets prices always tend to move toward their long-run equilibrium values caused us to ignore voices that foresaw the developing bubble and coming crisis. But something caused most of us to ask the wrong questions, and to dismiss the people who got it right, and I think one of our first orders of business is to understand how and why that happened.
it is not simply a matter of finding the right explanation of the recent financial meltdown and recession. The search by most macroeconomists is constrained by a certain set of unquestioned methodological precepts. These precepts go to the heart of the conception of Economics as a Science.
in list: Economic Crisis
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