From: John Conover <john@email.johncon.com>
Subject: Re: forwarded message from William F. Hummel
Date: Sat, 15 Aug 1998 02:30:47 -0700
John Conover writes:
>
> There is another epistemological issue worthy of argument-that of
> manipulating an economic system (be it national policy, or picking
> stocks,) through averages, or macroeconomic strategies. In the
> previous simulation, 100,000 days were used to determine the
> averages. Why? because at 100,000 days, there was a 70% confidence in
> the metrics. The issue here is that implementation of a macroeconomic
> agenda will not result in immediate effects-in the case of the equity
> exchange model, altering interest rates, conceivably, could take
> centuries to produce a desired outcome.
>
As an aside, many macroeconomic failures, although based on
defensible, formal foundations, can be seen as an implication of the
above paragraph, (the current Japanese economic fiasco happens to come
to mind-wait and hope it will go away sort of strategy.) Since
fractals are a system of infinite complexity, (ie., fractals are made
up of fractals, which in turn are made up of fractals, and so on,) an
economic system can be manipulated expediently by taking very precise,
quick metrics of the system, and acting quickly to achieve a means to
an end. Time is the enemy, and waiting is the kiss of death. Fractals
tend to wonder off on their own accord, and they can cover a lot of
territory while a bureaucracy piddles around with what to do. Once a
fractal gets started in a direction, it follows a statistical
mechanism that is progressively more difficult to alter. Inflation is
a fractal-so is the GDP, as are industrial markets.
If you look at what Alan Greenspan brought to the FED, it was this
concept. The FED rate has not changed much, but if you look at what
the FED has done to the liquidity, it is slam dunked once a week.
More than anything else, A. Greenspan's contributions in making the
FED a right-action-ready organization is what has held the Asian
Contagion away from the US boarders-at least so far.
John
--
John Conover, john@email.johncon.com, http://www.johncon.com/