Patterns in the Dark: Understanding Risk and Financial Crisis with Complexity Theory
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