Economics & Ecology:: the lessons of complex systems


Scientists, sometimes in cooperation with economists, are taking the lead in a young field that applies complexity theory to economic research, rejecting the traditional view of the economy as a fully transparent, rational system striving toward equilibrium. The geophysics professor and earthquake authority Didier Sornette, for example, leads the Financial Crisis Observatory, in Zurich, which uses concepts and mathematical models that draw on complexity theory and statistical physics to understand financial bubbles and economic crises.

Get "fit for randomness" [with Ontonix UK]

The following extract is taken from a thought-provoking article from McKinsey. Power curves are much loved by authors, such as Clay Shirky, Seth Godin, Charles Leadbetter to illustrate the potential for conversation, collaboration and innovation, through adoption of: web 2.0; social media; crowdsourcing; collective intelligence, etc.
They are, therefore, very much “in vogue” and, I suspect, will continue to be so for some time to come…probably not a great surprise that economic theory is enjoying a renaissance in difficult times!
However, from the perspective of “financial regulation” in UK, it is difficult to believe that, if FSA chose to IGNORE the warning signs [generated by financial modelling] about Northern Rock and HBOS, they would be any more effective by monitoring “the system”!!!
“Make the system the unit of analysis. You can’t assess the behaviour and performance of a specific agent—for example, a financial-services company—without gauging the behaviour and performance of the system in which it…

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At what point does a “high-risk” strategy become a matter of Corporate Governance?:: FSA on HBoS “very serious misconduct”


…perhaps a more pertinent question is: “how many sets of rules are there?”

The FSA has censured Bank of Scotland after finding it guilty of “very serious misconduct” which led to it being bailed out by the Government and taken over by Lloyds Banking Group.

The regulator says a fine in this case would be “both merited and substantial” but has decided against imposing a financial penalty as it says the taxpayer has already bailed out the bank once through the Lloyds takeover of Halifax Bank of Scotland in January 2009. Read more of this post