Harry Seldon's blog

Fractals, Chaos, and Control Systems on Rails

Read

Good news from the combat against the crisis

Posted by Harry Seldon on February 22, 2009

Julia island
In my 2009 wishes, I wished that people better understand the world. For this purpose, I suggested they read The (Mis)behaviour of Markets: A Fractal View of Risk, Ruin and Reward by Benoit Mandelbrot.
Actually, for one year and a half we have been inside this growing up crisis I have been appalled by the small number of articles in the media about Mandelbrot’s work on Finance and more generally by the small number of articles about chaos theory and economy. Indeed more than ten years ago, Mandelbrot explained why the finance world was walking on its head. To make it short, it is because financial theory fundamental principles are wrong and over-optimistic. These principles state that the hazard involved in the market theory is regular enough to be smoothed by the big numbers law. This hazard is “benign”. Basically, with the standard theory, crisis can’t happen. So yes, you must be dreaming, there is no crisis, unless you listen to Mandelbrot that tells you that the hazard is actually “savage” and potentially leading to a collapse of the market: a crash.

So where is the good news ?

It looks like main stream media are slowly understanding Mandelbrot’s work and they are speaking about it. I found yesterday an excellent article in one of the main French financial newspapers about Mandelbrot’s work on finance. The second good news, contained in that article, is that Mandelbrot’s book are being republished. A third good news, is that the author of the previous article, Philippe Herlin is very proactive and has just created a Facebook group called “Finance & Mandelbrot”. I joined immediately ! An instant interest of this group is that Philippe Herlin gives a list of news articles about the subject (given below). Please notice the link called How Fractals Can Explain What’s Wrong with Wall Street which is dated on February 1999. Yep, it is not a typo for 2009 !
Last but not least, there is a significant political news. Mandelbrot showed that the financial system was fractal, exhibiting the same behaviour at all scales. Actually that was the start of his long and brilliant career. Later on he showed the same behaviour for climate, geology, ecology, or biology. Actually about any natural system is fractal and even chaotical. However, there is a good way to smooth the behaviour of a system, it is called control. Our world needs more control (distributed control whenever possible). That is to say, more rules, more ways to enforce them and more ways to measure their efficiency. So the good news is today European leaders backed sweeping new regulations for financial markets. Questions remain, will the rules be good and will they be enforced?

By the way, if you want to understand a little better the whole world, if you want to hear about economy, climate, geology, ecology, or biology in less than 200 pages, just read these two amazing books. Your vision of the world will change and for almost free because these books are quite old (but have never been so fashionnable).

Nostalgia: I was offered these books 13 years ago. I read them then. They are definitely among the best gifts I have ever received. They stand in my bookshelf, one arm away from where I am writing these lines. Believe me these books are far easier to read than the Bible so you can give them to your children. I read them again 2 years ago after completing my studies in Dynamical Systems and Controls. I understood plenty of things I had missed in the first reading. So you can also offer these books to adults. They will learn quite a few things about the nature of our world.

Resources

In English

In French

If you know other good links about fractal, chaos theory and economy, please leave them in the comments.
Mandelbrot set

Posted in | no comments | Tags , , , , , , , , | atom

Delicious

Trackbacks

Use the following link to trackback from your own site:
http://harryseldon.thinkosphere.com/trackbacks?article_id=44

  1. Yes, he can save the world ! From Harry Seldon's blog
    He is from a minority. He is American, lives in the US but has a dual culture. He studied in the best universities. He is one of the smartest guys on Earth. He had many awards for his outstanding work along his long and brilliant career. He has al...
  2. You will want to join the [Control Theory group on Facebook](http://www.facebook.com/group.php?gid=49861879200&ref=mf) if, or you know you are a Control theorist when: * For you, Vibration Control is not only a Sex toy. * Finding the good frequenc...
  3. There will be war, or, how to prevent it From Harry Seldon's blog
    For some time, I have wanted to post about "crises are natural preludes to wars". I am definitely not that qualified to say that, so [I am glad these guys (LEAP experts) are](http://www.leap2020.eu/English_r25.html). They predicted quite well the ...
  4. Let us draw the Mandelbrot set with OFC. The point is to make a new example of use of OFC and it is also to have some fun as the fractal theory is so interesting. To see how fashionable it is, read this post:Good news from the combat against the c...
  5. Tribute to Benoit Mandelbrot From Harry Seldon's blog
    Benoit Mandelbrot is, imho, the biggest genius of the XXth century and our time. His work has already technologically changed our world (CGI, cell phone antennas, processors shapes, etc.). But the day, the philosophy, the epistemology, behind his ...

Comments

Leave a response

Leave a comment

Markdown enabled




Search

Navigate


Recent Comments

Recent Posts

Tags

actuators aircraft atc blog chaos chaos_theory charts control controllers controls crisis economy finance flight fractals git gnc gs guidance linux mandelbrot marketing navigation ns ofc on pilot rails ruby sas scs sensors statistics systems techcrunch thinkosphere tutorial typo ubuntu wifi

Categories

Archives

Syndicate


Sponsor