About the complexity of financial markets

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Henry Ford.

In Michael Moore's last movie, Capitalism: A love story, two important arguments were made about the complexity of financial markets: (1) the smartest students do not become any more engineers or scientists, but go work for financial companies (or become lawyers), (2) where they use their intelligence to create financial products and derivatives that a handful of people only can understand.

Following the idea of Darwin's evolution, there is a strong incentive for having the mechanisms of financial markets to be purposely muggy and incomprehensible. As Henry Ford recognizes, if the rest of us would understand, there would be a revolution. This hidden complexity does not do any good to the rest of the society, whatever your own economic or social values are. This needs to be changed.

Comment on reductionism by K. Popper

"As a philosophy, reductionism is a failure. From the point of view of method, the attempts at detailed reductions have led to one staggering success after another, and its failures have also been most fruitful science."

K. Popper, in Scientific reduction and the essential incompleteness of all science, section IX, an addendum to The Open Universe.

See my review of his book.

Free will according to K. Popper

"We are 'free' (or whatever you want to call it), not because we are subject to chance rather than to strict natural laws, but because the progressive rationalization of the world--the attempt to catch the world in the net of knowledge--has limits, at any moment, in the growth of knowledge itself which, of course, is also a process that belongs to the world.

Rational action without foreknowledge--of a scientific, a hypothetical, kind at least---is impossible; and it is this very same foreknowledge which turns out to be so limited as to leave room for action--that is, for 'free' action."

K. Popper, in The Open Universe, section 23.

See my review of his book.

Role of science according to K. Popper

"The method of science depends upon our attempts to describe the world with simple theories: theories that are complex may become untestable, even if they happen to be true. Science may be described as the art of systematic over-simplification--the art of discerning what we may with advantage omit."

K. Popper, The Open Universe, section 15.

See my review of his book.