Complexity theory and financial regulation
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19 February 2016
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- Stefano Battiston et al.
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RE: Complexity theory
Going the way back, natural sciences may also benefit from the complex analytic tools developed and used by economic scientists. The spectacular interactions within microbes in the human microbiota and between them and the host (Homo sapiens) are characterized by a high degree of complexity. A fast enlarging list of disease states is being correlated to perturbations in the composition of the microbiota. It will be very useful to have a method to alert us and give us an early warning predicting an imminent crisis in the composition of the microbiota. Economic science can teach us how to analyse and predict adverse events in this hyper-complex system, the holobiont.
RE: Complexity theory and financial regulation
I am surprised that your experts have not yet managed to understand the basic cause of our 2007 economic crisis. It was forecast by certain economists of a school of economic thought about which your experts obviously have never heard. This school of thought claims that its was due to so called business cycles in land prices (associated with speculation in its value), and not simply because the banks allowed more money to be invested in land purchase, which was the basic cause.
Those universities whose funds come from industrial organizations and for years have been deliberately suppressing certain macroeconomic truths, including the idea that macroeconomics is complex and therefore cannot be easily analyzed, see: "The Corruption of Economics" by Fred Harrison and Professor Mason Gafney.Aside but related to this is my way of showing how our total macroeconomics or social system works. I suggest your experts write to me at: [email protected] for the results of my research about a better and original way to model the whole system in a seamless, logical and scientific manner. Alternatively, if they want they should see my new book "Consequential Macroeconomics--Rationalizing About How our Social System Works".
I wish to share this knowledge for free, not make money on book sales, so what I can show anybody who is interested will finally allow the complexity problem to be solved in a better way.
The model which I use is shown in the attached table. By taking aggregate values of the 19 variables, all of the complexity can be eliminated.
RE: Complexity theory and financial regulation
The main reason for the complexity of financial systems is caused by the fact that they represent derived processes. The first order proces is the real world, real time society in all its complexity. The economic systems are a first order derivate. The financial systems are but a third order derivate.
Since 20 (Europe) to 40 (USA) years the growth strategy has been based on a financial strategy that seems to be no longer sustainable. The financial crisis has influenced the financial systems in such a way that it has become unstable and vulnerable. The volatile situation is favourable for speculation and trade in financial derivates. Governments are taking action now by stabilising the financial system. Starting the rescue from the financial side however is in my view only symptom fighting.
The growing lack of contact with and responsibility for the first order proces, that of society, is causing difficulties in solving the problem.
A better understanding of the control strategy of real world, real time physical first order processes could give a completely fresh view on the subject. It could also give a better understanding of the dependicies we must live with. Solving the real big problems like the lack of natural resources and the climate change should also be served by a fresh view.
To end with an political and thus non scientific statement: the troubled view, caused by the monocultural of the past decades, needs a eye wash.