New discussion paper at Economic Thought is called A Quantum Theory of Money and Value, Part 2: The Uncertainty Principle.
Here is the abstract:
Economic forecasting is famously unreliable. While this problem has traditionally been blamed on theories such as the efficient market hypothesis or even the butterfly effect, an alternative explanation is the role of money – something which is typically downplayed or excluded altogether from economic models. Instead, models tend to treat the economy as a kind of barter system in which money’s only role is as an inert medium of exchange. Prices are assumed to almost perfectly reflect the ‘intrinsic value’ of an asset. This paper argues, however, that money is better seen as an inherently dualistic phenomenon, which merges precise number with the fuzzy concept of value. Prices are not the optimal result of a mechanical, Newtonian process, but are an emergent property of the money system. And just as quantum physics has its uncertainty principle, so the economy is an uncertain process which can only be approximated by mathematical models. Acknowledging the dynamic and paradoxical qualities of money changes our ontological framework for economic modelling, and for making decisions under uncertainty. Applications to areas of risk analysis and economic forecasting are discussed, and it is proposed that a greater appreciation of the fundamental causes of uncertainty will help to make the economy a less uncertain place.
Download the paper here.
Now that the Higgs boson has (apparently) been discovered at the Large Hadron Collider, physicists are turning their attention to the next big thing. Theorists have long predicted that the LHC would produce supersymmetric particles, but these have so far failed to make an appearance. There was some hope that data would show signs of the stop particle (the supersymmetric partner of the top quark) but that too appears to be fading.
Yesterday Michael Peskin gave a talk in which he argued that the LHC evidence did not imply that supersymmetry was dead – only that we needed a bigger accelerator, such as the International Linear Collider. His argument was in part based on the “sociological evidence” that “1. No theorist who believed in SUSY before 2009 has renounced SUSY in the light of the LHC exclusions,” and “2. Model builders are still building models with 200 GeV charginos.”
As someone who is interested in the sociology of scientific prediction, I would argue that the fact that theorists do not renounce their beliefs due to lack of experimental confirmation, or refrain from building models, is not exactly convincing proof that a theory is right.
A safer prediction is that supersymmetry will remain attractive for a long time yet – in large part because of its aesthetic qualities – and will continue to be used as an argument for larger accelerators. The lack of a stop at current energies is just a green light.
Talk at roundtable on climate change and cultural heritage in Athens, April 2012. Watch video
Theme of this event was Future 2112
Latest World Finance column is on the science of prediction. And hockey.
The Canadian ice hockey player Wayne Gretzky once said, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”
Businesses and societies try to perform a similar trick, through forecasting. We seem to have a genetic urge to look into the future, to see around the corner, to guess where the puck is going. In fact even simple bacteria have genetic networks that are used to predict the location of food, and move towards it.
Traditionally the domain of religions, astrologers, and mystics, the role of prognosticator-in-chief has now passed to scientists, who use highly complex mathematical models to predict the weather, the spread of diseases, the economy, and much else – positioning ourselves better for whatever is coming up.
Unfortunately, their track record is less impressive than Gretzky’s.