What is cogito partialis?
Man has a tendency to look at 'things' from the third person's perspective.
Imagine looking down on how a group of ants busy about themselves to move a large cob of cord from one side of the road to the other.
Man will theorise about the way the ants move, about how they queue up, about how they work with one another to bring about good for the whole.
But few will think that the presence of the man may have itself changed the calculations of the ants, and altered the way the ants move.
In other words, we're experts in thinking partially, in partial equilibria. Melting down this wall of ice must be something that anyone wanting to advance human understanding should do.
(By the way, I'm not sure my Latin is right. If anyone can point out I'd be grateful!)
Monday, 17 August 2009
Thursday, 6 August 2009
It's all about Nash
So everything is Nash isn't it? Nothing settles down until a Nash equilibrium is found.
In a 2x2 game, Nash is simple. Even in context of choices over continua (e.g. picking a point on a function), Nash is still just the point(s) where the optimal functions of two players cross.
And theoretically (need to think more carefully on this), the more players there are, the harder it is to find Nash.
Ad infinitum, it should be impossible to find Nash.
So why is it that we do find Nash in this world. It must be that people choice varies as the number of players increase. That is, payoffs change with the number of players.
Eventually this may lead us to a sort of majority rules world, where if enough people act in a certain way, it would induce even more people to behave in that certain way, and thus we achieve Nash equilibria (or the minority gets squeezed out).
Mark: this is herd effect!
---------
Another (unrelated) idea
What is the link between time series and cross-sectional. Surely there must be a link, i.e. the cross-sectional distribution of strategies today (mark: this links to Nash equilibirum idea) would influence the time-series variation of outcomes. Modelling phenomena with Panel Data isn't enough. The influence of distributions today on future outcomes must be explicitly taken into account.
One can almost think of this as an Einstein-type idea. People have always known space and time as separate dimensions, but no one had thought about how they might interact. Einstein did. And I'm sure his results are more general that most people understand (all results are always more general than people think).
Will the constant for us be the infinite case, where we have an infinite amount of players? In this case, it would be impossible influence anything / any body, since what one can do is of close to no importance. What would Nash equilibrium look in that world??
And would the restrictions imposed by microeconomic foundation axioms necessarily imply restrictions over how many (how little) Nash equilibria there might be??
In a 2x2 game, Nash is simple. Even in context of choices over continua (e.g. picking a point on a function), Nash is still just the point(s) where the optimal functions of two players cross.
And theoretically (need to think more carefully on this), the more players there are, the harder it is to find Nash.
Ad infinitum, it should be impossible to find Nash.
So why is it that we do find Nash in this world. It must be that people choice varies as the number of players increase. That is, payoffs change with the number of players.
Eventually this may lead us to a sort of majority rules world, where if enough people act in a certain way, it would induce even more people to behave in that certain way, and thus we achieve Nash equilibria (or the minority gets squeezed out).
Mark: this is herd effect!
---------
Another (unrelated) idea
What is the link between time series and cross-sectional. Surely there must be a link, i.e. the cross-sectional distribution of strategies today (mark: this links to Nash equilibirum idea) would influence the time-series variation of outcomes. Modelling phenomena with Panel Data isn't enough. The influence of distributions today on future outcomes must be explicitly taken into account.
One can almost think of this as an Einstein-type idea. People have always known space and time as separate dimensions, but no one had thought about how they might interact. Einstein did. And I'm sure his results are more general that most people understand (all results are always more general than people think).
Will the constant for us be the infinite case, where we have an infinite amount of players? In this case, it would be impossible influence anything / any body, since what one can do is of close to no importance. What would Nash equilibrium look in that world??
And would the restrictions imposed by microeconomic foundation axioms necessarily imply restrictions over how many (how little) Nash equilibria there might be??
Tuesday, 28 July 2009
Themes
SWF tipped for greater role in financing real estate projects. Think strategic infrastructures.
Inflation lingering on minds of investors:
http://www.ft.com/cms/s/0/eb6a9432-77a9-11de-9713-00144feabdc0.html
http://www.ft.com/cms/s/0/c335ad26-77ea-11de-9713-00144feabdc0.html
Before inflation kicks in, economy needs to show track record of expansion. Likely to be consumer led.
And likely to see recovery in housing market.
This bull run is all about 're-risking your balance sheet'. Whatever looks risky (and yields lots) will get bought.
Momentum trading likely to continue.
Inflation lingering on minds of investors:
http://www.ft.com/cms/s/0/eb6a9432-77a9-11de-9713-00144feabdc0.html
http://www.ft.com/cms/s/0/c335ad26-77ea-11de-9713-00144feabdc0.html
Before inflation kicks in, economy needs to show track record of expansion. Likely to be consumer led.
And likely to see recovery in housing market.
This bull run is all about 're-risking your balance sheet'. Whatever looks risky (and yields lots) will get bought.
Momentum trading likely to continue.
Sunday, 26 July 2009
OECD economic indicators
http://www.nytimes.com/interactive/2009/07/02/business/economy/20090705-cycles-graphic.html
Looks fascinating. Given markets move ahead of the economy, has the boat already been missed?
Looks fascinating. Given markets move ahead of the economy, has the boat already been missed?
Mathematical finance
http://www.ft.com/cms/s/0/341d5432-76d6-11de-b23c-00144feabdc0,s01=1.html
Now everyone loathes it. But how many people said so before things blew up? If what they say is 'truth', why weren't they able to identify 'truth' before the crisis?
A bubble had its genesis in Black-Scholes-Merton. The belief in Black-Scholes-Merton itself was a bubble. And that was because human are programmed to look at partial equilibrium...
...or maybe not: we are destined to know only part of the 'truth'. That information on the 'truth' always appears to us with a lag...
Now everyone loathes it. But how many people said so before things blew up? If what they say is 'truth', why weren't they able to identify 'truth' before the crisis?
A bubble had its genesis in Black-Scholes-Merton. The belief in Black-Scholes-Merton itself was a bubble. And that was because human are programmed to look at partial equilibrium...
...or maybe not: we are destined to know only part of the 'truth'. That information on the 'truth' always appears to us with a lag...
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