tag:blogger.com,1999:blog-1740670447258719504.post4035921601767352355..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: A Question about Modeling UncertaintyEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1740670447258719504.post-49280787147714378362011-11-27T17:20:13.866-05:002011-11-27T17:20:13.866-05:00Make that one of the purposes of economics. Anoth...Make that one of the purposes of economics. Another is to educate policy makers.Luke Leahttps://www.blogger.com/profile/11290760894780619646noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-79975435524723841332011-11-27T17:17:55.946-05:002011-11-27T17:17:55.946-05:00@ - "Conceptually it's not hard to make t...@ - "Conceptually it's not hard to make that distinction, but it's harder to model" Make that impossible to model. For not only are uncertainty and risk two different things, but the price information we need to estimate them is less-than-perfect if you subscribe to Morgenstern's observations on the problems of measurement. Which is why there is no substitute for experience, historical knowledge, a solid understanding of logic and the basic principles of economics (such as they are) and good intuition; they are all necessary for a successful investment banker -- to say nothing of someone in Ben Bernanke's position. Crucial decisions are not, or shouldn't be, based on models on a blackboard but on events that take place in the individual actors' heads, whether they be ordinary consumers, businessmen, or the head of the FED. The purpose of economics is to educate those heads.Luke Leahttps://www.blogger.com/profile/11290760894780619646noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-75337411492471203922011-11-02T13:18:29.080-04:002011-11-02T13:18:29.080-04:00Off topic, but I notice Russ and Don don't eng...Off topic, but I notice Russ and Don don't engage you any more. Russ's challenge is what, a whole 5 days old now?<br /><br />My premise is that CH is not about discussion and more about advertising. When was the last time you were allowed to question the merits of Chevy *during* the Chevy commercial?<br /><br />Invisible Backhand, notorious threadjacker.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-30678731507475948342011-11-02T11:30:45.945-04:002011-11-02T11:30:45.945-04:00I think you might want to read Michael Emmett Brad...I think you might want to read Michael Emmett Brady's articles again.<br /><br />http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1033456<br /><br />If you don't wish to read by Brady, then I recommend Daniel Ellsberg's work on decision-making under uncertainty. Keynes's weight of evidence index and interval estimate approach to probability (with upper and lower bounds) throw a spanner into the Subjective Expected Utility hypothesis.<br /><br />If you don't want to read Daniel Ellsberg or Michael Emmett Brady, I suggest reading Benoit Mandelbrot, who distinguishes between "mild risk" and "wild risk" in probability applied to financial markets.<br /><br />The Society for Imprecise Probability - Theories and Applications (SIPTA) has published research on something called a "Choquet integral" approach to probability, which vindicates George Boole and John Maynard Keynes.<br /><br />http://www.sipta.org/<br /><br />But unless I'm misunderstanding your question, my point is this - subjective probability and Keynes's interpretation of probability and uncertainty are fundamentally different.Blue Aurorahttps://www.blogger.com/profile/02044362251868221897noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-23298978409868494862011-11-02T11:28:01.002-04:002011-11-02T11:28:01.002-04:00I think you might want to read Michael Emmett Brad...I think you might want to read Michael Emmett Brady's articles again.<br /><br />http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1033456<br /><br />If you don't wish to read by Brady, then I recommend Daniel Ellsberg's work on decision-making under uncertainty. Keynes's weight of evidence index and interval estimate approach to probability (with upper and lower bounds) throw a spanner into the Subjective Expected Utility hypothesis.<br /><br />If you don't want to read Daniel Ellsberg or Michael Emmett Brady, I suggest reading Benoit Mandelbrot, who distinguishes between "mild risk" and "wild risk" in probability applied to financial markets.<br /><br />The Society for Imprecise Probability - Theories and Applications (SIPTA) has published research on something called a "Choquet integral" approach to probability, which vindicates George Boole and John Maynard Keynes.<br /><br />http://www.sipta.org/<br /><br />But unless I'm misunderstanding your question, my point is this - subjective probability and Keynes's interpretation of probability and uncertainty are fundamentally different.Blue Aurorahttp://www.nationstates.net/noreply@blogger.com