Re: [Fis] informational economics?, msg from Igor M.
:58 PM To: fis Subject: [Fis] informational economics? Dear FIS colleagues, Some aspects of the current financial crisis might be related to discussions we had in this list on information and the nature of economic flows years ago (economic networks, and also, central aspects of ecological ascendancy). The amazing growth of financial assets of many kinds during last decade may have conduced finally to a brutal crisis like the current one, not just for greed or political lack of control, but also for dearth of scientific understanding. I would argue that: 1. Financial flows are anticipatory information flows that preclude the structural changes and the evolution to follow by real economic structures. 2. Without financial anticipation, economic changes could not keep pace with technology science progress due to the viscosity of social and legal webs of relationships. 3. The creation of successive informational (financial) layers becomes an exercise in complexity accumulation, that almost inexorably leads to cross instability thresholds and a general loss resilience. 4. Though the financial info is a sort of virtual builder, a potential energy of sorts, it has to suffer closure upon the real economy; then its excessive flows in out from some sector (eg, housing in some strategic countries), amplified in the global complexity, have now potential to destabilize the whole financial layers and bring the real economy to havoc. 5. Economy is an informational systems, in crucial aspects, not well explained yet... advancing an info economics would be quite timely. Would it be interesting to argue on some of these very roughly penned aspects (while our pockets get emptier and emptier)? best Pedro PS. The recent track on foundations of art is still worth of some further comment... Pedro C. Marijuán Grupo de Bioinformación Instituto Aragonés de Ciencias de la Salud Avda. Gómez Laguna, 25, Pl. 11ª 50.009 Zaragoza. España Telf.: 34 976 71 3526 Fax: 34 976 71 5554 [EMAIL PROTECTED] ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis
Re: [Fis] informational economics? msg STan S.
msg from Stan Salthe -- Pedro -- Dear John and colleagues, Thanks a lot for adding deep thought to my comments. I quite agree with your orientations and would make only a few further remarks. 1. Going beyond the equilibrium approaches of neoclassical economics is fundamental. I would bring here the points developed by the Santa Fe group of economists and physicists last decade (Brian Arthur and others): dispersed interactive agents, no global controller, cross level hierarchical organization, continual adaptation, perpetual novelty, and out of equilibrium dynamics. Overall, they talked on the economy as another instance of adaptive nonlinear networks. But my personal impression is that these very theoretical views were in themselves inspirational for promoting further deregulation of financial markets (Stu Kauffman and others were quite close to Al Gore and the Whitehouse circles). The invisible hand of selforganization! A MOST interesting observation! I think the flaw in that program (if it was one) is that when a system self-organizes it may do so in ways that are not congenial to agents that exist at a lower scale within that system (here -- people). 2. Perhaps more foundational aspects have to be revised: value itself, plus the way transactions are produced (Lanham 2006 has posited a very bold view: we would trade informational motives...). A new theory on price formation could be more or less envisioned. But I would be more staunch on following the inspiration of biological schemes of organization to put into place anticipatory dynamics (not to be understood necessarily under dynamic systems theory). ATP energy currency plus the system of second messengers contain very curious systemic thresholds which the living cell has never crossed. Here I detect in the background the view that hierarchies will be in some way self-similar. This may be the case for some aspects of a scale / compositional hierarchy (I don't know of any demonstrations of that yet), but it's not likely for the specification / subsumptive hierarchy. There are regularities across levels in both cases (transitive relations), but quantitative one's are not known. Since the subsumptive hierarchy is founded on set theoretic format, the question could be addressed there. Are sets theoretically in any way self-similar quantitatively? For the compositional hierarchy, are there quantitative aspects that could be self similar? STAN 3. If the following figures (just from my memory) are correct, financial anticipatory flows have grown dramatically in last two decades, from around 4 times the GDP (80's), to 10 times (90's), and close to 20 in last years. Unknown thresholds have been trespassed, and the capability to destructively amplify any serious fluctuation from real economy is daunting. The Energy crisis, plus the housing crisis, plus the mass of faulty credits in circulation have put on the knees both the real economy and the whole financial anticipatory wrappings. The inevitable closure of the financial on the real, and vice versa, means that the social viscosity of the system --our very lives-- will be put on a very tough stance. Is this but an anticipation of the even bigger global sustainability crisis? best regards Pedro ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis
Re: [Fis] informational economics?
Dear Pedro, Thank you an interesting topic for the discussion. The study of the Informational layer of economics is extremely important for right understanding of the situation at the financial market. I would like to point to the following informational layer – namely, the role of expectations of traders of the financial market. Is it possible to create models of such expectations and their role in dynamics of assets? I think that G. Soros was one of the first who discussed this problem in detail in his book “Alchemy of Finances.” He pointed to independence of dynamics of expectations from the situation in “real economics”. Free will of traders plays a crucial role. Soros proposed to describe free will by the apparatus of QM, in some way to explore the analogy electron-trader. This idea was realized by my graduate student, Olga Choustova, see http://arxiv.org/abs/quant-ph/0109122 see also Choustova, O.A. (2006). Quantum bohmian model for financial market. Physica A 374, 304--314. who used so called Bohmian model of QM, an analogue of the pilot wave which guides a quantum particles was used to describe dynamics of expectations. Real economics was incorporated in the model through a potential function in financial Schrodinger’s equation. As in physical QM, the financial pilot wave can exhibit a complicated behavior even for zero potential, i.e., zero impact from the real economics. Moreover, the model is nonlocal. It is too early to say how much one can proceed in such a framework. However, it is clear that the informational component plays an important role in modern economics. Andrei Khrennikov, professor of applied mathematics, director of International center for mathematical modeling in physics, engineering and cognitive science, University of Vaxjo, Sweden - Original Message - From: Pedro C. Marijuan [EMAIL PROTECTED] Date: Wednesday, October 29, 2008 15:00 Subject: [Fis] informational economics? To: fis fis@listas.unizar.es Dear FIS colleagues, Some aspects of the current financial crisis might be related to discussions we had in this list on information and the nature of economic flows years ago (economic networks, and also, central aspects of ecological ascendancy). The amazing growth of financial assets of many kinds during last decade may have conduced finally to a brutal crisis like the current one, not just for greed or political lack of control, but also for dearth of scientific understanding. I would argue that: 1. Financial flows are anticipatory information flows that preclude the structural changes and the evolution to follow by real economic structures. 2. Without financial anticipation, economic changes could not keep pace with technology science progress due to the viscosity of social and legal webs of relationships. 3. The creation of successive informational (financial) layers becomes an exercise in complexity accumulation, that almost inexorably leads to cross instability thresholds and a general loss resilience. 4. Though the financial info is a sort of virtual builder, a potential energy of sorts, it has to suffer closure upon the real economy; then its excessive flows in out from some sector (eg, housing in some strategic countries), amplified in the global complexity, have now potential to destabilize the whole financial layers and bring the real economy to havoc. 5. Economy is an informational systems, in crucial aspects, not well explained yet... advancing an info economics would be quite timely. Would it be interesting to argue on some of these very roughly penned aspects (while our pockets get emptier and emptier)? best Pedro PS. The recent track on foundations of art is still worth of some further comment... Pedro C. Marijuán Grupo de Bioinformación Instituto Aragonés de Ciencias de la Salud Avda. Gómez Laguna, 25, Pl. 11ª 50.009 Zaragoza. España Telf.: 34 976 71 3526 Fax: 34 976 71 5554 [EMAIL PROTECTED] ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis
[Fis] informational economics?
Dear FIS colleagues, Some aspects of the current financial crisis might be related to discussions we had in this list on information and the nature of economic flows years ago (economic networks, and also, central aspects of ecological ascendancy). The amazing growth of financial assets of many kinds during last decade may have conduced finally to a brutal crisis like the current one, not just for greed or political lack of control, but also for dearth of scientific understanding. I would argue that: 1. Financial flows are anticipatory information flows that preclude the structural changes and the evolution to follow by real economic structures. 2. Without financial anticipation, economic changes could not keep pace with technology science progress due to the viscosity of social and legal webs of relationships. 3. The creation of successive informational (financial) layers becomes an exercise in complexity accumulation, that almost inexorably leads to cross instability thresholds and a general loss resilience. 4. Though the financial info is a sort of virtual builder, a potential energy of sorts, it has to suffer closure upon the real economy; then its excessive flows in out from some sector (eg, housing in some strategic countries), amplified in the global complexity, have now potential to destabilize the whole financial layers and bring the real economy to havoc. 5. Economy is an informational systems, in crucial aspects, not well explained yet... advancing an info economics would be quite timely. Would it be interesting to argue on some of these very roughly penned aspects (while our pockets get emptier and emptier)? best Pedro PS. The recent track on foundations of art is still worth of some further comment... Pedro C. Marijuán Grupo de Bioinformación Instituto Aragonés de Ciencias de la Salud Avda. Gómez Laguna, 25, Pl. 11ª 50.009 Zaragoza. España Telf.: 34 976 71 3526 Fax: 34 976 71 5554 [EMAIL PROTECTED] ___ fis mailing list fis@listas.unizar.es https://webmail.unizar.es/cgi-bin/mailman/listinfo/fis
Re: [Fis] informational economics?
Very topical, Pedro. A few remarks, interleaved: At 01:58 PM 10/29/2008, Pedro C. Marijuan wrote: Dear FIS colleagues, Some aspects of the current financial crisis might be related to discussions we had in this list on information and the nature of economic flows years ago (economic networks, and also, central aspects of ecological ascendancy). The amazing growth of financial assets of many kinds during last decade may have conduced finally to a brutal crisis like the current one, not just for greed or political lack of control, but also for dearth of scientific understanding. I would argue that: 1. Financial flows are anticipatory information flows that preclude the structural changes and the evolution to follow by real economic structures. This seems correct in general, but in the current situation a lot of the response is reactive. 2. Without financial anticipation, economic changes could not keep pace with technology science progress due to the viscosity of social and legal webs of relationships. I think there is also a regulative role in distributing risk according to risk tolerance and greed. Futures markets (and other derivatives like hedges) are a bit like predators, with prey the primary market. In predator-prey relations, predators can even out booms and busts in the prey. This is well documented in ecological work (e.g., the introduction of wolves to islands like Grand Mannan in New Brunswick and Isle Royale in Lake Superior). However things are not quite so simple, since predators can increase to much, leading to a drop in prey and a lagging drop in predators (lynx and rabbits in the Canadian subarctic are a classic example). Now imagine that the secondary market becomes much larger than the primary market. Perilous, I would say, especially if it is unregulated. 3. The creation of successive informational (financial) layers becomes an exercise in complexity accumulation, that almost inexorably leads to cross instability thresholds and a general loss resilience. Right, as above. There is an additional problem with complex derivatives, though: the information about them is obscure. Neo-classical economics relies on perfect information. My friend Don Ross has invetigated neo-classical economics in some depth (some relevant books at http://mitpress.mit.edu/catalog/author/default.asp?aid=238) across a number of applications. We discussed applying information theory with an eye to understanding the role of imperfect information in evolutionary game theory, but I found that nobody really knows what economic equilibrium is (Nash equilibria and Pareto optimality are only a small part of the story). However, if the market is not ideal, then its evolution is highly path dependent. This is from a letter I wrote to Don some time ago: Dear Don, I hope this gets to you in time. This is off the top of my head. It isn't as organized as I would like it to be. State Functions and Non-Equlibrium Systems In traditional physics we deal only with conserved quantities like energy, mass, spin, charge and the like. In this case the conservation laws serve as the reference for calculations of change. The conservation laws permit the use of the Hamiltonian formulation of physics. The fundamental quantities are also guaranteed to be state functions. In fact their sum over all component systems is an invariant. This also preserves reversibility. The basic idea can be extended to other types of systems in which all of the fundamental properties are conserved. Although the equations of motion are not linear, conservation of fundamental quantities permits linear additivity of these quantities, making analysis of state changes relatively easy through approximative methods. This is fairly straight-forward. You will recall my claim in my Laplace paper that this is the model for not only physics, but for most of modern science. The extension to equilibrium systems is also straight-forward. In this case the usual assumption is that the system moves from one equilibrium state to another. Examples are classical thermodynamics, classical economics and classical population genetics. In this case, however, there are nonconserved quantities, such as entropy and work capacity, money supply, and adaptation, respectively (the last is explained in my papers on increases in fitness). Note that these are all information based functions, even if they are not directly related to energy in an obvious way. Since these quantities are not conserved, change can induce sources and sinks, and the quantities are not linearly additive. The solution to this problem is to look at changes as if they occur arbitrarily close to equilibrium, making the changes reversible. This fiction requires that the changes occur arbitrarily slowly. In real cases this does not occur, of course. The fiction, though preserves linearity and reversibility, and allows us to define the
