Apparently Mandlebrot demonstrated that unhampered markets are inherently unstable and develop speculative bubbles.
I have yet to read this paper but apparently it is a bit technical:
http://www.e-m-h.org/Mand66.pdf
Has anyone else heard about this and have any thoughts on the matter?
These are just tentative thoughts from a cursory examination, so bear with me.
What I gather from the paper so far is a lack of framing the nature of economies as ‘ecologies’ is the first problem with it (hell, it’s the same issue I have with Austrian views on economies, but that’s not important at this time…). As such, I think it follows if we set things from the perspective of mathematical models then instability, fluctuations, and unpredictability are bad/undesirable features in an economy (as you really can’t make a decent set of equations to resolve all possible cases that could arise). So, I’m very leery of the idea of using pure math to explain a very human situation without digging deep into the human interactions first and foremost, regardless of who produces the model and for what reason(s).
In a word, it’s just positivism. Empty mathematics. Meaningless.
I was hoping for a more in depth austrian critique of these ideas…
I’ll try get it on one of the Austrian prof yahoo groups and see what they think.
Markets are inherently fluid.
I haven’t read the paper, I plan to though. But, I want to comment on the attitude that somehow the austrian framework makes mathematics meaningless. Math is in reality a logical system, and each equation has a “real world” meaning that can be deduced. As always, if the assumptions or the process is wrong then the conclusions will be wrong, but this does not mean that relationships derived from sound theory cannot be expressed at all using mathematics.
I understand the austrain concern of subjective values and multiple variables (I’m just saying that spoken words, in a logical progression, can be broken down into mathematical proofs).
Very true but I think Juan’s main side swipe was that he was using a positivist methodology and since this is not applicable to economics then the maths therein in meaningless.
I agree, I was too broad in my post (and was not directly focused on Juan’s post). But I absolutely agree that the positivist methodology makes the conclusions meaningless.
That was my poorly made point, yes. Thanks for clarifying.
The entreprenuerial experience is unstable, uncertain, and speculative. Consider the steps:
An unproven idea is by its’ very nature speculative and uncertain.