4 ms·

A far stronger case could be made that the crash was because markets aren't free enough, since those taking risks knew governments would back them up. It's an

by dood 18y ago

A far stronger case could be made that the crash was because markets aren't free enough, since those taking risks knew governments would back them up. It's an interesting and very complex topic, but this article is little more than nakedly partisan mud-flinging. The crash proves nothing, except that modern economics is beyond the ken of modern man.

greendestiny 18y ago
I think your last sentence is most telling. Neither the free agents trading in the market nor the regulators would have continued as they did if they knew what would happen. The answer is to understand and then set up more diverse, failure tolerant economies.
- netcan 18y ago
  answer?
- orib 18y ago
  And how would you do that? what would make the economy more fault tolerant, specifically?
  - magoghm 18y ago
    The same way you do it with computers: avoid central control. Central control is fragile, non scaleable (and promotes corruption when human beings are involved).
    - harshavr 18y ago
      Self-fulfilling rumours which trigger bank runs can be a distributed phenomena, no one person needs to engineer it. It just needs to start somehow. More importantly, it is possible that most people are wrong on some particular question about a market. If so, a sudden discovery of the truth by the mainstream might lead to a desertion of this market.
      - 0x44 18y ago
        Self-fulfilling rumours which trigger bank runs can be a distributed phenomena If we were to get rid of the physical token of our monetary value, it would be impossible for a run in one bank to negatively effect all of them. After all, an electronic 'withdrawal' has to go somewhere.
  - greendestiny 18y ago
    I really don't know. The stock market is somewhat balanced by bonds (and short selling?) in that they are alternative positions for people to go into in order to profit from changing conditions - but there doesn't seem to have been much of a way for the market position itself relative to credit becoming more expensive. I guess at the really abstract level you want independent agents to balance each other such that the sum of their positions resistant to change rather than reinforcing each other so they can all fail at once.
  - johnm 18y ago
    Rather than trying to dictate/engineer a "fault tolerant" economy, I suggest thinking more along the lines of "what simple mechanisms can be put in place in how the system functions so that participants in the markets/economies can make better decisions?" Two things that I think are critical: * true transparency (e.g., look at the CDS fiasco ("look, it's insurance but it's not!" and the complete lack of reporting) * rate limiters (e.g., look at how much the recent volatility is due to the frantic rushing around, the reaction to all of that franticness, etc. For the physics enthusiasts in the crowd think of the propagation of supernovae through a given volume of a galaxy)
    - greendestiny 18y ago
      They are exactly the kind of steps I think make an economy "fault tolerant" - don't read too much into my choice of words there.
- johnm 18y ago
  That's an emergent property of the system (which emerges or not) so how are you going to engineer that?
netcan 18y ago
I agree that this proves nothing. I agree that the US financial system or market in general was never free in a sense that would appease a libertarian but.. Your sentiments are interestingly similar to what a lot of Marxists/Communists had to say (not too many left though) when that 'failed': That is, point to the Soviet Union & say: 'That was never true communism. So it failed. If it was truly a Marxist regime, this never would have happened.' As I said, I wouldn't personally take this as a 'proof' of anything. But what seems inevitable is that this is causing a swing (in public opinion) away from deregulation of financial markets. I think it's very likely that there'll be a wholesale swing against the suite of things associated with 'libertarianism.' That's a shame in a way. Whether or not financial regulatory policies are optimal or not, has very little to do with the moral theories of libertarianism for example. Anyway, there seems to be a big shift in the sway these ideas hold.
- dood 18y ago
  I wasn't entirely aware I was conveying sentiments ;) As far as economics goes, my creed tends toward mysterianism (though you correctly deduce I have a soft spot for libertarianism). I don't think we will make much progress in the field until we make and analyse many actual experiments. Even then I doubt that economics can be usefully understood. It is simply too complex. I think the best chance of real progress (i.e. something other than rhetoric) is in simulation, or even better, massively multiplayer games. Eve Online is an interesting step in this direction.
  - eru 18y ago
    We have a lab for experimental economics at our university. The let people play little games for money.
    - dood 18y ago
      From the little I know about these kind of experiments, they're a good start and useful groundwork, but in my opinion too simple to reveal much about the real thing as a whole. I don't think real insight will be gained until we start to model and analyse large(ish) complex, dynamic systems. I'd be interested to hear if anyone knows of any such attempts.

by dood 18y ago

greendestiny 18y ago

I think your last sentence is most telling. Neither the free agents trading in the market nor the regulators would have continued as they did if they knew what would happen. The answer is to understand and then set up more diverse, failure tolerant economies.

netcan 18y ago
answer?
orib 18y ago
And how would you do that? what would make the economy more fault tolerant, specifically?
- magoghm 18y ago
  The same way you do it with computers: avoid central control. Central control is fragile, non scaleable (and promotes corruption when human beings are involved).
  - harshavr 18y ago
    Self-fulfilling rumours which trigger bank runs can be a distributed phenomena, no one person needs to engineer it. It just needs to start somehow. More importantly, it is possible that most people are wrong on some particular question about a market. If so, a sudden discovery of the truth by the mainstream might lead to a desertion of this market.
    - 0x44 18y ago
      Self-fulfilling rumours which trigger bank runs can be a distributed phenomena If we were to get rid of the physical token of our monetary value, it would be impossible for a run in one bank to negatively effect all of them. After all, an electronic 'withdrawal' has to go somewhere.
- greendestiny 18y ago
  I really don't know. The stock market is somewhat balanced by bonds (and short selling?) in that they are alternative positions for people to go into in order to profit from changing conditions - but there doesn't seem to have been much of a way for the market position itself relative to credit becoming more expensive. I guess at the really abstract level you want independent agents to balance each other such that the sum of their positions resistant to change rather than reinforcing each other so they can all fail at once.
- johnm 18y ago
  Rather than trying to dictate/engineer a "fault tolerant" economy, I suggest thinking more along the lines of "what simple mechanisms can be put in place in how the system functions so that participants in the markets/economies can make better decisions?" Two things that I think are critical: * true transparency (e.g., look at the CDS fiasco ("look, it's insurance but it's not!" and the complete lack of reporting) * rate limiters (e.g., look at how much the recent volatility is due to the frantic rushing around, the reaction to all of that franticness, etc. For the physics enthusiasts in the crowd think of the propagation of supernovae through a given volume of a galaxy)
  - greendestiny 18y ago
    They are exactly the kind of steps I think make an economy "fault tolerant" - don't read too much into my choice of words there.
johnm 18y ago
That's an emergent property of the system (which emerges or not) so how are you going to engineer that?

netcan 18y ago

I agree that this proves nothing. I agree that the US financial system or market in general was never free in a sense that would appease a libertarian but.. Your sentiments are interestingly similar to what a lot of Marxists/Communists had to say (not too many left though) when that 'failed': That is, point to the Soviet Union & say: 'That was never true communism. So it failed. If it was truly a Marxist regime, this never would have happened.' As I said, I wouldn't personally take this as a 'proof' of anything. But what seems inevitable is that this is causing a swing (in public opinion) away from deregulation of financial markets. I think it's very likely that there'll be a wholesale swing against the suite of things associated with 'libertarianism.' That's a shame in a way. Whether or not financial regulatory policies are optimal or not, has very little to do with the moral theories of libertarianism for example. Anyway, there seems to be a big shift in the sway these ideas hold.

dood 18y ago
I wasn't entirely aware I was conveying sentiments ;) As far as economics goes, my creed tends toward mysterianism (though you correctly deduce I have a soft spot for libertarianism). I don't think we will make much progress in the field until we make and analyse many actual experiments. Even then I doubt that economics can be usefully understood. It is simply too complex. I think the best chance of real progress (i.e. something other than rhetoric) is in simulation, or even better, massively multiplayer games. Eve Online is an interesting step in this direction.
- eru 18y ago
  We have a lab for experimental economics at our university. The let people play little games for money.
  - dood 18y ago
    From the little I know about these kind of experiments, they're a good start and useful groundwork, but in my opinion too simple to reveal much about the real thing as a whole. I don't think real insight will be gained until we start to model and analyse large(ish) complex, dynamic systems. I'd be interested to hear if anyone knows of any such attempts.