Patterns in the Dark: Understanding Risk and Financial Crisis with Complexity Theory
$14.56
| Author(s) | |
|---|---|
| Pages |
241 |
| Format |
|
| Published Date |
1999 |
Patterns in the Dark is that rare book that offers an entirely new perspective on an issue of ongoing concern to investors: the unpredictability of financial markets. In this groundbreaking work, leading investment strategist and authority on chaos theory, Edgar Peters makes accessible ways of understanding market behavior that-until now-were known only to specialists.
Introduction:
Patterns in the Dark is about the links between the Austrian school of economics and complexity theory; however, it is nonmathematical. The intent is to draw attention to the dangers of too much planning at either the individual or the government level. We will find that rules are important for creating and maintaining complexity, but the rules should be limitations, not commands. They should encourage cooperation and ensure that the environment also encourages competition.
Patterns in the Dark is also about the nature of uncertainty, and why it is necessary for a free society. We often consider uncertainty to be undesirable because it means that things are risky. We will find that, at times, particularly when dealing with competition, risk can only be lowered when uncertainty is increased. The ability to adapt and evolve may be destroyed by reducing uncertainty. The emerging market governments are on the verge of doing just that; they are confusing uncertainty with risk. A large part of our discussion is tied to distinguishing between these two similar but different states.
Contents:
- Imposing Order: Conspiracies and the Mathematics of Ignorance
- Uncertainty, Vagueness, and Ambiguity: The Need for Information
- Complexity and Time: The Dynamics of Uncertainty
- Subjectivism: “The Economics of Time and Ignorance”
- Diversity and Knowledge
- Crisis and Competition: Creative Destruction in Free Markets
- Economic Evolution: Change in Real Time
- Creativity: Uncertainty, Innovation, and Entrepreneurs
- Rules and Law: Limits in Complexity
- Degrees of Order: Balancing Rules, Freedom, and Uncertainty
- The Need for Uncertainty
Patterns in the Dark: Understanding Risk and Financial Crisis with Complexity Theory By Edgar E. Peters pdf
3 reviews for Patterns in the Dark: Understanding Risk and Financial Crisis with Complexity Theory
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Trent Curry (verified owner) –
Ever the standard bearer for the rational approach in the complacent and often hide-bound practices of most people to the world of financial-economics, Peters makes a compelling and ultimately convincing case for the paradigm of complexity to supplant that of equilibrium.
Lest the rank-and-file practitioner forget, the most humble methods one has for interpreting any information in the market have their conceptual grounding from the 1930’s application of equilibrium in physics to economics. These humble methods include the Portfolio Theory of the 1970s and Graham & Dodd of the 1930s. What most practitioners fail to appreciate is that once that conceptual foundation is changed from equilibrium to complexity, every metric and every conclusion drawn from those metrics change also.
The changes Peters highlights, while based on solid science, challenge much of the convetional wisdom. It is the millenium and age of enlightenment. Investors should treat themselves to some of the same and read this book.
Cade Lawrence (verified owner) –
I found the discussions of complexity and risk as applied to financial crisis to be superficial and somewhat platitudinous. There are no in depth discussions of the factors involved in any recent financial crisis. There are various discussions of risk, complexity, evolution and Keynesian vs. Austrian schools of economics but no real depth or new perspectives on any of these issues are presented. The discussion of the pros and cons of socialism(collectivism) vs. capitalism(free market) societies was not much more substantive than an article you might see in the Business Section of USA Today. A graph showing(arguing) that the US is higher in on the scale of economic “uncertainty” than China or Russia is highly suspect. One of the defining features and advantages of the US capitalistic system is the relative sanctity of private property and enforceable contracts which provide a foundation of “certainty” upon which vibrant commerce can be enabled. Such institutions are completely lacking in communist states which is one of the major reasons for their collapse. I have to question the scholarship behind the presentation of such a comparison. This book is not worth your time or money.
Alison Cabrera (verified owner) –
This seems to be the author’s own loose ideas about Austrian economics vis a vis complexity in markets. It is not complexity theory in any formal or quantitative sense. It was a pleasant enough read, but in terms of boosting any “understanding” of risk, etc., it might only have sharpened a bit of my skepticism about various other schools and methods purporting to do so.