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Download Butterfly Economics: A New General Theory of Social and Economic Behavior eBook

by Paul Ormerod

Download Butterfly Economics: A New General Theory of Social and Economic Behavior eBook
ISBN:
0465053564
Author:
Paul Ormerod
Category:
Social Sciences
Language:
English
Publisher:
Basic Books (January 25, 2001)
Pages:
217 pages
EPUB book:
1128 kb
FB2 book:
1613 kb
DJVU:
1274 kb
Other formats
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Rating:
4.7
Votes:
707


Butterfly Economics: A New General Theory of Social and Economic Behavior is a book by Paul Ormerod dealing with economic theory, published in 1999.

Butterfly Economics: A New General Theory of Social and Economic Behavior is a book by Paul Ormerod dealing with economic theory, published in 1999. The author uses a plethora of insect-related metaphors to show that an economy tends to function like a living organism and is thus able to learn and to adapt.

In his first book „The Death of Economics", which I still like very much because I found it useful, Paul . In the preface, Paul Ormerod apologizes mildly to neo-classical economists and expresses hope that this new book should be easier for them to stomach

In his first book „The Death of Economics", which I still like very much because I found it useful, Paul Ormerod compared in detail the gross failure of the neo-classical equilibrium model, the standard textbook model, compared with economic data. The book did not waste time on philosophy or ideology but presented a criticism that was and remains valid. Butterfly Econonomics" takes a different tack. In the preface, Paul Ormerod apologizes mildly to neo-classical economists and expresses hope that this new book should be easier for them to stomach. He knows, as we all do by now, that that school of thought does not take kindly to criticism.

The title Butterfly Economics comes from the idea in chaos theory that a butterfly flapping its wings here could . I believe that it has not only influenced my understanding of social and economic behavior, and I expect to re-read this in a few years' time.

The title Butterfly Economics comes from the idea in chaos theory that a butterfly flapping its wings here could cause a hurricane on the other side of the world. It's not that chaos is guaranteed in economics; it's just that we never know when it'll occur, or what will cause it. "Small changes can have big consequences, and vice versa," Ormerod notes. His arguments range far afield. He talks about crime and family structure, biology, fashion, and many other topics seemingly unrelated to economics.

Butterfly Economics book. Goodreads helps you keep track of books you want to read

Butterfly Economics book. Goodreads helps you keep track of books you want to read. Start by marking Butterfly Economics: A New General Theory of Social and Economic Behavior as Want to Read: Want to Read savin. ant to Read.

New York : Pantheon Books. inlibrary; printdisabled; ; china.

Электронная книга "Butterfly Economics: A New General Theory of Social and Economic Behavior", Paul Ormerod

Электронная книга "Butterfly Economics: A New General Theory of Social and Economic Behavior", Paul Ormerod. Эту книгу можно прочитать в Google Play Книгах на компьютере, а также на устройствах Android и iOS. Выделяйте текст, добавляйте закладки и делайте заметки, скачав книгу "Butterfly Economics: A New General Theory of Social and Economic Behavior" для чтения в офлайн-режиме.

The theory presented by the book departs from conventional economic wisdom which understands individuals as isolated . It has applications in all fields of social science, as well as in logic and computer science.

The theory presented by the book departs from conventional economic wisdom which understands individuals as isolated decision makers who act based on a rational evaluation of sufficient information about cost and benefits of respective choices. Butterfly economics adds interaction to the equation and argues that individuals interact when pursuing their interests, thereby gaining new information, which in turn influences their decision-making. Originally, it addressed zero-sum games, in which one person's gains result in losses for the other participants.

By Paul Ormerod Pantheon Books 240 pages

By Paul Ormerod Pantheon Books 240 pages. Anyone browsing the shelves at book superstores has seen them: books with provocative titles, whose covers promise to revolutionize our understanding of important phenomena. As expected, the cover of the book promises that it contains "A New General Theory of Social and Economic Behavior. Of course, I read it with more than a modicum of skepticism.

Paul Ormerod, "Butterfly Economics .

Paul Ormerod, "Butterfly Economics: A New General Theory of Social and Economic Behavior" 1999 pages: 174 ISBN: 0375407650 EPUB 3,4 mb. Why did VHS, an inferior video recording technology, succeed in the marketplace, driving the superior Betamax out of business? . In this cogently and elegantly argued analysis of why human beings persist in engaging in behavior that defies time-honored economic theory, Omerod also explains why governments and industries throughout the world must completely reconfigure their traditional methods of economic forecasting if they are to succeed and prosper in an increasingly global marketplace.

Paul Ormerod has been head of the Economic Assessment Unit at The Economist and a visiting professor at the Universities of London and Manchester. What Our Readers Are Saying.

In this cogently and elegantly argued analysis of why human beings persist in engaging in behavior that defies time-honored economic theory, Ormerod also explains why governments and industries throughout the world must completely reconfigure their traditional methods of economic forecasting if they are to succeed and prosper in an increasingly complicated global marketplace.
  • Fato
But somehow, the author just does not bring the idea across very clearly.

He seems to be trying to tell us (among other things):

1. That the mathematical modeling of Economics suffers from some flaws.
2. That the underlying assumptions are wrong.

It would have been better if the book had been arranged with making a single chapter out of each major flaw and then going forward to fill in some detailed examples.

As it happens, if you are a skeptic about Economics as a discipline, then Nassim Nicholas Taleb makes observations that are much more readable.

My recommendation for this book depends on the price. If it is about $1, then I would recommend buying it. If it's $2, then I would recommend letting it stay where it is.
  • Iell
I bought into this book- which systematically tears down a series of theories on economic modeling- until the second to last chapter. At this point, Ormerod presents a fairly cursory overview of his own theory of interacting agents, and though his presentation isn't so heavy-handed as to come across as a sales pitch, I feel that I'm expected to view this as the culmination of economic theory. Just as in the models he discards, there seem to be some brash oversights and simplifications in his own thinking.

For example, he repeatedly insists that it's sufficient to study just the U.S. economy because it is by far the most important economy in the world (that's changing already), and arrogantly dismisses Thomas Malthus' prediction that economic growth would ultimately be curbed by overpopulation (it already is in some parts of the world). He points to 170 years of evidence showing that continued growth is inevitable in a capitalist system, but bases this on assumptions that world pollution isn't getting worse (?!) and that 170 years is sufficient duration of time for which to make conclusions (when just a few chapters earlier he cited an anecdote about 200 years being nothing on the geologic scale and the past can't always predict the future).

These exceptions aside, I'm generally reverential towards this work, and Ormerod's ability to lucidly explain fundamental but often counterintuitive concepts in economics. For example, the book begins with a description of behavior in an ant population, and the tendency of ants to influence each others' behaviors in a way that makes the group population seem incomprehensible. He repeatedly recalls this example throughout the text to describe how interacting agents affect our economy and lead to unpredictable results (for example, the success of the inferior VHS format vs. Betamax). Surprisingly, he praises the effectiveness of business studies, despite their lack of theory and analytical rigor, for emphasizing an empirical understanding of how things actually work and pragmatic search for a good vs. perfect strategy. He offers some compelling recommendations on fiscal management- for example, that we should encourage speculation on foreign exchange so that exchange rates converge closer to an actual value vs. drift away to extreme under or overvaluation.

I don't ever read economics texts, don't follow the stock market, but found this to be an utterly compelling book. I believe that it has not only influenced my understanding of social and economic behavior, and I expect to re-read this in a few years' time.
  • Sirara
In his first book „The Death of Economics", which I still like very much because I found it useful, Paul Ormerod compared in detail the gross failure of the neo-classical equilibrium model, the standard textbook model, compared with economic data. The book did not waste time on philosophy or ideology but presented a criticism that was and remains valid. „Butterfly Econonomics" takes a different tack. I recommend reading at least the first half of „The Death of Economics" first, followed by this one. One must first know what is the problem before one can appreciate the solution.
In the preface, Paul Ormerod apologizes mildly to neo-classical economists and expresses hope that this new book should be easier for them to stomach. He knows, as we all do by now, that that school of thought does not take kindly to criticism. His expressed aim is to concentrate on complex, biological models instead of mechanical ones. In the Introduction, he announces boldly that he will abandon the idea of fixed preferences, an admiriable task! The ‚butterfly` symbolizes not deterministic chaos (the theme of the second half of his first book) but rather the ability of a biological system to interact, adapt and learn. The author`s aim is to understand the two main problems of economics: (1) Why is there economic growth, and (2) why are there business cycles?
Complexity as the edge of chaos is alluded to, but the main point of chapter 1 is to introduce the reader to Alan Kirman's ant model, a variation on Brian Arthur's urn model. Here, the emphasis is on modelling the interaction of agents, or ‚agent-based modelling`, and Paul does a fine job of explaining the ant model. One wonders, as one reads the book, why econ texts are not written in such stimulating fashion rather than presenting us with a theory that doesn't work. Neither Kirman nor Ormerod present the ant model as solving any economic problem quantatitively, rather, it is discussed in the spirit of showing what is left out of ‚optimizing behavior`.
In chapter 2, Paul explains why we should give up hope of short term prediction, and criticizes the efficient market hypothesis (EMH) for its failure to allow for adequate volatility. I'll come back to this and some other points below. The third and fourth chapters discuss crime and family values in terms of the personal perferences of interacting agents. Again, this stimulates the reader to imagine how one could write an econ text to make it meaningful.
Chapter 5 mentions Radner, whose work (along with Kirman`s) every econophysicist should know. Roy Radner is the theorist who drove all the nails in the neo-classical theory coffin back in 1968. He showed that if uncertainty is introduced into the neo-classical equilibrium model then the agents can't locate equilibrium, so that no trades are made. In other words, uncertainty makes the model's economic eficiency plunge from 100% to zero, which is a more realistic model of the Third World (the equilibrium model is not an empirically realistic model of any real market).
In the sixth chapter, business cycle forecasting is introduced and (pre-EU) the question is raised whether Italy can meet the fiscal requirements necessary to enter the European monetary union. I read about the way that Long Term Capital Management helped Italy to solve this problem via ‚creative financing` in Dunbar's „Inventing Money". Chapter 7 discusses the failure of econometrics to extract fixed rules of behavior (machine-like models, if noise-driven) from the data, and begins the discussion of the failure of the standard model (RBC, or real business cycle theory) to explain the data. Economists are correctly lambasted for ignoring empirical data in discussing the „correctness" of their models, and Paul's interesting new model of the GNP is presented in chapter 8. I found these chapters to be the most stimulating. There may still be something here for econophysicists to work on.
Interacting ants (variable preferences), the theme the entire book, are presented explicitly again in chapter 9. We`re informed of the neo-classical idea of a ‚production function`in chapter 11, and economists are again properly taken to task for what I would label as Aristotelian-style philosophic postulations, while roundly ignoring the available empirical data. I find the discussion of the production function to be very useful, because Paul presents it, as he presents everything, in clear, simple language. This saves me the trouble of having to read dense, rambling economics papers to learn about that idea, although another source is Mirowski's „More Heat than Light".
A very interesting thought is mentioned as a footnote on page 168, and I`ll leave it to the reader to ponder that one. In chapter 13, Paul further advises governments against too much regulation, no doubt having in mind his own UK before it was Thatcherized to the opposite limit (the US is presented as a happy counter-example, but since Reagonization we have our own severe unsloved problems). Here, the basis of his recommendation is the impossibility of accurate short-term predictions, something else for econophysicists to think about. It is true that short term prediction is useless in a stochastic system. In a deterministic chaotic or complex system, one sees only regular behavoir at short times (because of local integrability). I guess the point here is that the GNP can be modelled stochastically. But however correct ‚hands off` advice may be in many cases, I would point out that the fixing of the Thai Baht after Thailand`s financial collapse seems to provide a good counterexample to a complete ‚hands-off` policy. Also, the failure of Mexico to fix the Peso and refuse to pay international loans ca. 1997 caused nearly total economic collapse for the then-growing middle class there, who held unpayable floating mortgage loans. So there's a lot of grist here for the econophysical mill. Ending this fine little book, Paul Ormerod emphasizes the ant model as an example of „one variant of the overall complex systems approach which (is proposed) in this book". That model is claimed to be only an extension of neo-classical economic theory. Now for some comments, which I hope will prove useful.
First, I see no reason why neo-classical econmists should take any solace from this book (thank goodness!): the ant model doesn`t rely on utility maximization, and is in not an extension of their model. It doesn't begin by perturbing the neo-classical equilibrium model (as Per Bak did by adding noise in „Dynamics of Money"), and seems completely unrelated to optimizing behavior. However, the ant model, while interesting and instructive, also is not complex and so references to complexity, or to complexity as living the edge of chaos seem unnecessary. Physicists do not yet agree on a definition of „complexity", but I like Chris Moore's definition, where „surprises at every length scale"are the essence of complexity. This rules out scaling and attractors, and food sources in the ant model are analogous to attractors. Here's what Moore means, I think. Chaotic and „random"/stochastic systems are simple, by this definition, not complex: the statistics of the distant future for specific classes of initial conditions can be known in advance for chaotic or stochastic systems without doing a step by step calculation. For a complex system, in contrast, there are „surprises" that prevent one from knowing any statistical distribution at long times, for a given initial condition, other than by watching the system unfold step by step. In other words, the system cannot be characterized by any statistical distribution because ‚surprises` all the way to infinite time occur (volatility and fat tails are not examples of ‚surprises`). For my taste, mutations of bacteria and viruses to new forms are the essence of complexity, physically. This kind of complexity is presumably found in markets, but where and how? We don't know how to quantify that stuff.
Here's a more serious criticism. The idea of the EMH presented in the text is Shiller's notion, based on dividends discounted infinitely far into the future. This is not a useful definition because it's not falsifiable (Modligliani-Miller even teaches that dividends are irrelevant). The best definition of the EMH, the one used by finance theorists, is represented by the Martingale condition (plus, I would add, with Hurst exponent H=0), which guarantees that there are no patterns in the statistics that can be exploited for unusual profit. Markov proceses fall into this category, and have been used to describe financial market statistics, including option pricing, quite accurately (see my new econophysics book). So the EMH doesn`t rule out either fat tails or nonstationary processes, both of which are required to describe the observed ‚volatility` of financial markets.
Finally, the ant model is not really ‚biology` but is instead noise driven mechanics. Why is that? Every mathematical model that can be written down is a mechanical model. As Turing showed, mathematics is a mechanical process, so whatever can be mathematicized classically is classical mechanical, in some sense. Turing's famous typewritter tape is a classical mechanical system. More to the point, financial market statistics are very accurately described by simple noise-driven ‚mechanical` models. The only known way to get away from fixed-machinery models (fixed hardware and fixed software) is to go to a neural net model that can learn from the environment, so that the connections change with time. The neural net may even be deterministic, but interaction with the environment prevents us from knowing the future, even theoretically. Finally, there is a reference to ‚value` in the text. I have described elsewhere why ‚value` is nonunique and therefore is an ill-defined notion.
In context, these are pretty minor criticisms, and to answer them properly (excepting the EMH error) one could not write an elementary book. So I think, in the end, that Paul Ormerod has done a fine job of using the ant model to symbolize what's missing in the standard, boring econ texts. Again, reading this book made me think how an econ text could be written to stimulate the reader to think about solving real, empirically-driven econ problems, and if Paul doesn't do take on that arduous task then someone else eventually will. If you want to read less than the entire book, then I strongly recommend chapters 1, 7, 8, and 12. The RBC and Paul's model of business cycles are presented for the reader's convenience as appendices.
  • Lanin
This short treatise examines the models of economic performance from the viewpoint of an external observer, and shows how many of these models fail to accurately account for fundamental human behaviors. In contrast, he puts forth models derived from the life sciences (ecology and animal behavior) and softer social sciences such as sociology and psychology, and shows how they are often better at explaining human behavior than mathematical equations.

The writing style is straightforward and very concise, yet not simplistic. The book requires minimal knowledge of economics to understand, but does require at least a high-school level knowledge of American and world history. The amount of math is appreciable, but the hard stuff is left in appendices, with graphs used in the main text. One plus of the book is it references many other influential texts in the social sciences. Overall, a good and quite quick read.