Economics and the Butterfly effect

Discussion in 'Economy' started by editec, Feb 7, 2009.

  1. editec
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    editec Mr. Forgot-it-All

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    I am writing this with the hope that this might help us understqand the TRUE NATURE of our economy

    Many of us are seeking to understand why our economy is in trouble

    Some of us (most of us, actually) are desperately seeking scapegoats to blame for it.

    Some of us want to blame Bush's policies.

    Some of us want to blame the Dems' policies.

    I find myself blaming the greed of bankers and FREE TRADE, so I am as guilty of this kind of flawed thinking as any of you.

    But let us consider....

    The Butterfly Effect

    Now what does the above, really mean as it regards our understanding of the economy?

    It means that in highly complex systems, like the weather, or the economy, very minor changes to a system can cause massive (and unpredictable!) changes in outcomes.

    CHOAS THEORY suggests that such systems become impossible to predict because there are simply too many variables each of which is really random, and so any change to any of those variables NO MATTER HOW APPARENTLY INSIGNIFICANT, can change outcomes in ways that are very very dramatic.

    Essantially, what this suggests is that NOBODY CAN PREDICT THE FUTURE STATE OF A HIGHLY COMPLEX SYSTEM WHERE THE VARIABLES ARE ESSANTIALLY RANDOM POSSIBILITES.

    It suggests that the explanations we so ften hear from the economic experts about WHY our economy did such and such, and how we might have altered that outcome to a happier one is mostly RETROSPECTIVE ACADEMIC JIVE-ASSED BULLSHIT.

    Why?

    Because while it easy to understand a complex event AFTER THE FACT, it is easy to trace the path we took to arrive at that state of affairs, it is IMPOSSIBLE to predict what would have happened if had done something differently

    Do you folks get that? I mean do you REALLY get it?

    If even a very insignificant change in one minor variable in a highly complex system can cause extremely different outcomes, then there is no way in hell that we can, in RETROSPECT, say that had we done something massively differently, we can know what the outcome would have been.

    We simply do not know the outcomes of changes made today in the future.

    In such a thing as the economy, the further in the future we are seeking to effect some change, the more unlikely that outcome actually is.

    For those of you wondering...the above is actually a fairly good argument for the AUSTRIAN SCHOOL of ECONOMICS, since part of their theory seems to be that we are better off letting the natural random events of laisse faire economy take their course without interference.

    Conversely, the Butterfly Effect is really suggesting there is no reason to think that messing with the economy will NOT necessarily lead to happy outcomes, either.

    What it really suggests is that there is no reason to assume that messing or not messing with the economy will lead to happy outcomes or unhappy outcomes to our economy IN THE LONGER RUN.

    In fact the Butteryfly Effect mathematically proves to us that we simply cannot KNOW what any alteration to the system will do in the longer run.

    So let's save ourselves a LOT of pain, shall we?

    Let's stop deluding ourselves that we can control the economy.

    We can only REACT (or choose not to react) to the current economy, but in both cases we cannot know if what we do will work to our benefit.

    So will the bailout work?

    We don't have a clue.

    All we can KNOW is that what we do will have some immediate effects on those variables that we change.

    If we give tax breaks some people will enjoy that immediate benefit.

    If we invest in some things they will have investment money.

    But as to the overall consequences to the economy in the longer term?

    Everything we do (or not do) is a LEAP OF FAITH

    The economy is NOT a deterministic event it is a random event.

    The economy is ruled by the laws of CHAOS THEORY and it is not ruled by your theory or mine about how it works, and what it will do if we attempt to change it.

    I just thought that you all might want to know that.

    We are all subject to the very human flaw that makes us think that we can see patterns and trends in what is REALLY nothing simply random outcomes.

    Much of what we see as a pattern or trand when we look at economic data is really nothing more than the outcome of RANDOM events.

    That pattern or trend could have been wildly different if but one small variable had been even slightly different.

    That economic data might APPEAR to have a pattern, because it does, but it's still just a random outcome

    That trend we see is basically meaningless and a misleading... if we think it can help us to make decisions about how to change the economy to suit our needs.

    Dust in the wind, folks.

    Even our massive economic world economy is little more than dust in the wind.
     
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    Last edited: Feb 7, 2009
  2. Article 15
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    Article 15 Dr. House slayer

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    Interesting post.

    I think our GDP is about 14 trillion or so. That means the stimulus bill represents about 5.7% of our GDP ... nothing to sneeze at. At that point are we really making insignificant changes to random variables?
     
  3. Skull Pilot
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    Skull Pilot Platinum Member

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    my god,

    I actually agree with ed on something.

    I have to do something to commemorate this moment.

    any ideas?
     
  4. editec
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    editec Mr. Forgot-it-All

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    No.

    We are making massive changes to random variables.

    And we STILL cannot know what the outcome of those changes will be....except for the short run outcomes, of course.
     
  5. editec
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    editec Mr. Forgot-it-All

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    Well...you could send Rosetta massive amounts of money

    But of course, since you understand the point of my post, you will do so knowing that you cannot know how that will effect Rosetta or for that matter the world's economy, in the long run.

    I'm willing to take the rish of accepting it, though.

    Do you need my mailing address or will you just donate the money directly to Rosetta via internet?

    Remember your act of generosity might very well be the flap of a butterfly's wing which leads us to that utopia we all want to live in.

    We can't know for sure, of course, but I strongly advise you to take that leap of faith immediately.
     
  6. LordBrownTrout
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    LordBrownTrout Gold Member

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    Damn, editec, I had to come out of exile to commend you on that post, garden buddy.
     
  7. editec
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    editec Mr. Forgot-it-All

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    Thanks man.

    Something perverse in my nature is just amused by the fact that the most advanced math and physics keeps telling us that mankind is mostly deluding itself.

    Being something of a control freak, chaos theory just blows me away, frankly.

    It shows us that we are but players in an unfolding universe which is no more a well ordered clockwork than it is a Tolken novel.

    And yet at the same time, despite it's apparent message of the delusion of control over our universe, it is the most inspiring reason I can think of to get out of bed every morning, too.

    The universe isn't just weirder than I can understand, it's actually weirder than I can even imagine.

    That thought helps me cope with my "Is that all there is?" ennui.

    Because Chaos theory informs me that the answer is obviously:

    No, that isn't all there is, you damned fool , editec. All that you can see and imagine you know isn't even a minescule fraction of what is.

    It's all rather humbling.
     
  8. PoliticalChic
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    PoliticalChic Diamond Member

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    Editec, sounds like you'd do a better job in that Senate House than some of the asses we have in there right now. Good Post.
     
  9. Diuretic
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    Diuretic Permanently confused

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    It's interesting but I just need to make a point. Economics isn't totally abstract and ethereal. It's about human behaviour or behaviour between humans. As such much of it is predictable. If it wasn't then we wouldn't be describing the current events as "catastrophic", we'd be calling it, "business as usual." Because economics is about human behaviour I don't think chaos theory applies.

    Okay pull me apart - it will be interesting to see where it goes :)
     
  10. dilloduck
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    dilloduck Diamond Member

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    If ALL of it is not predictable--how can you possibly plan your country or life around it ?
     

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