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July 28 - December 24, 2024
The longer the time delay, however, the harder it is to control the shower and the more oscillations you get.
an important characteristic of nonlinear dynamic systems: sensitivity to initial conditions.
nonlinear dynamic systems are path dependent, or in other words, history matters.
The only way to see how the system would play out was to let it play out.
The full dynamic complexity of the economy becomes even clearer when we think of it as what scientists call an n-body problem.
First, you have an inventory of widgets.
Second, there is the stock of immediately available productive capacity.
The third and final stock is the total amount of long-term production capacity.
human behavior is full of regularities.
humans are economically self-interested and smart—but not that smart.
we satisfice—basically, we take the information we have, and we do the best we can.
our sense of fairness and reciprocity prompt a desire to punish people who treat us unfairly, we also naturally reward people who help us and give us things.
humans are “conditional cooperators” who will behave generously as long as others are doing so, and “altruistic punishers” who will strike back at those perceived to behave unfairly, even at the expense of their own immediate interests.
much of the volatility we see in the real-world economy may be generated by the dynamics of people’s decision rules, rather than by exogenous, random shocks.27
the brain housing your mind is a part of your biological equipment, but it has a specialized function: the processing of information.
“Those who tell the stories rule society.”
Stories are vital to us because the primary way we process information is through induction.
Humans particularly excel at two aspects of inductive pattern recognition. The first is relating new experiences to old patterns through metaphor and analogy making.
Second, we are not just good pattern recognizers, but also very good pattern-completers.
people just make up stories to explain what they think is a pattern.32
squishy
Luna said squish mallow when i read this word
the agent’s environment, creates an internal model of the agent’s external world. The
rules that make a profit—i.e., they contribute to the chain’s ability to get a reward—grow in strength over time and get used more frequently.
the historical price pattern of the stock, its historical dividend payout, and a risk-free interest rate.
two fives will join to make a ten, a ten and a four will make fourteen, and so on. Physicists call such a sudden change in the character of a system a phase transition.
modems and better user interfaces pushed the edge-to-node ratio in people’s social networks above the magic ratio of 1, thus creating an explosion in usage.
everyone on earth is within six connections of each other.
lattice graphs have high degrees of separation, it might take as many as twenty or thirty hops to hook one coast up to the other.
When moving from a lattice to a random graph, the number of degrees of separation collapses to a handful.
people who don’t fit in our normal cluster are bridges out of our social networks and connect us to other social networks.
three variables guide the behavior of such networks. The first is the number of nodes in the network. The second is a measure of how much everything is connected to everything else. And the third is a measure of “bias” in the rules guiding the behavior of the nodes.
As the size of a Boolean network grows, the potential for novelty increases exponentially.
In a virtuous circle, technology change enables larger units of economic cooperation, which in turn can leverage greater informational scale, which in turn creates more potential for future innovations.
number of interdependencies in the network grows faster than the network itself.
meetings to ten (if all the permutations occur) even though the size of the company is the same. The sole reason for this is the increase in the density of communications connections.
This kind of interdependency in a network creates what Kauffman calls a complexity catastrophe. The effect occurs because as the network grows, and the number of interdependencies grows, the probability that a positive change in one part of the network will lead to a cascade resulting in a negative change somewhere else grows exponentially with the number of nodes. This in turn means that densely connected networks become less adaptable as they grow.
network growth creates interdependencies, interdependencies create conflicting constraints, and conflicting constraints create slow decision making and, ultimately, bureaucratic gridlock.
as an organization grows, its degrees of possibility increase exponentially while its degrees of freedom collapse exponentially.
the interdependencies of IBM’s business system meant that there were many opportunities for people to say no.
The more interactions required to get something done, the higher the probability of a conflict or a constraint.
Network theory shows that organizations can take two actions. One is to reduce the density of connections, and the other is to increase the predictability of decision making.
networks in the natural and computer worlds are structured as networks within networks.
A related move is to give the units within a hierarchical structure more autonomy.
From the viewpoint of an outsider who does not know what the rule is, the behavior of a low-bias node is difficult to predict, while a high-bias node is easier to predict.
the more regularity there is in the behavior of the nodes, the more density in connections the network can tolerate.
recipe for creating a dysfunctional organization: just mix unpredictable behavior, a flat hierarchy, and lots of dense interconnections—the chances of getting anything done would be roughly zero.
evolutionary systems work best when their sensitivity to change is in a medium, in-between range.
system has been successful in the past, then few major changes are likely to improve it. Rather, the odds are that the vast majority of possible major changes will harm it.
to knock the economy back to full employment, Keynes advocated that the government play a role by injecting money into the system.
emergent phenomena, that is, characteristics of the system as a whole that arise endogenously out of interactions of agents and their environment.
