Small Brains, Big Problems; Or, It’s Complicated

October 11, 2013

complicatedWe came across this item today, which makes for a nice addendum to yesterday’s post about the indispensability of human judgment even (or especially) with today’s complex and detailed decision-making models.

Kevin D. Williamson writes about a research fellow in applied mathematics and complex systems who is bumping up against the limits of mathematical modeling:

Having made the switch from physics to social systems, Mr. DeDeo discovered that the complexity of the data describing human action is so vast that modern mathematics does not have the tools to deal with it. Like many scholars of complex systems, he believes that a new discipline within mathematics — probably entailing an intellectual revolution on the order of the invention of calculus — is needed before scientists can even begin to get a handle on the relationships between  variables in the systems they are studying.

We’re limited by Bonini’s Paradox:  As our models become more complete and more accurate, they become as difficult to understand as the underlying reality they are meant to represent; as they become easier to understand, they become less accurate and less complete.

Or in Paul Valéry’s words:  “Everything simple is false. Everything complex is unusable.”

This sounds very similar to BoE Director of Financial Stability Andrew Haldane, quoted in yesterday’s post, who warned that “fundamental limitations of the human mind” thwart increasingly complex (and sometimes frivolous) attempts at regulation.

This belief is new, and not helpful. As the authors note, “Many of the dominant figures in 20th century economics—from Keynes to Hayek, from Simon to Friedman—placed imperfections in information and knowledge centre-stage. Uncertainty was for them the normal state of decision-making affairs.”

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