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View Diary: The Black Swan by Nassim Nicholas Taleb: A review (32 comments)

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  •  Can't Say I Understand It All (4+ / 0-)
    Recommended by:
    gogol, onanyes, BachFan, 1864 House

    But it sounds to me like too many conservative economists are relying solely on the results of mathematical forecasts and not taking into account any "wild cards" that could upset them. Reminds me of Asimov's Foundation series and how the Psychohistorians are surprised when thing go a bit off the charts.

    •  It sounds like you got it. (6+ / 0-)

      The math may work beautifully, but if the model is too simplistic (and it almost always is), it is no good.

      "Obama won. Get over it."

      by onanyes on Sun Aug 29, 2010 at 06:20:24 AM PDT

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      •  Exactly; economists are in love with equations (0+ / 0-)

        but forget that human beings frequently behave "irrationally" (i.e., not like homo economicus).

        It's like a physicist or an engineer excluding friction from her calculations -- it makes the equations simple and beautiful, but it's a really crappy approximation of how things will work (or not work) in real life.

        "Specialization is for insects." -- Heinlein

        by BachFan on Sun Aug 29, 2010 at 07:17:22 AM PDT

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    •  Black Swan event =EQ= What's not modelable. (2+ / 0-)
      Recommended by:
      LuvSet, Winnie
      Taleb identifies this special class of economic events -- essentially That Which Is Unmodelable.

      He missed one logical interconnection, related to capitalism and the situations where capitalism fails. He sees the Big Bubbles. 1996-2000 and 2003-2008 fit right in with Taleb's applications of standard statistical methods.

      He misses Big Criminality.

      The 2003-2008 Big Bubble was accompanied by corporate fraud that has resulted in wealth concentration related to some 2,500,000 houses, at a minimum, and $4-trillion in direct theft.

      This same Big Bubble also was used by such as Goldman, Sachs to steal money at $1-billion a pop with fraudulent deals. The key misrepresentation from GS in these frauds was misuse of the term "synthetic" in contracts. I have read several of these contracts.

      Moneys were obtained from banks and pension funds under expectation that the investors were obtaining ownership shares in "synthetic" shell companies that owned mortgages. GS committed fraud. There were no mortgages. Investors received only payments/hold_fees from bettors in GS's Derivative Casino.

      GS bribed/lobbied its way to paying a $550-million fine. And doing no significant restitution. And no RICO prosecution. And more of such flim-flam on the way.

      Taleb is a brilliant statistician. But you have to read Richard Koo to understand the massive Balance Sheet Recessions. And also William Black for why this is bank robbery and the human effects.

      The very large Black Swans are also crime sprees. That was the case for 1929 and also for the Japanese blow-out in the 1990s and USA again in 1996-2000/2003-2008. Corruption is what fuels both the explosive waste of investment money and the core redistribution of trillions to the criminal plutocracy.

      Career criminals + Angry White Males + KKK wannabes + Personality Disorder delusionals + Pro-Life Christians =EQ= The GOPer Base

      by vets74 on Mon Aug 30, 2010 at 04:56:50 AM PDT

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