Mark Levin's fallacy that the Free Market is likephysics...
i think it was Friday night that said that the free market functioned like physics, with immutable laws that are as carved in stone as the speed of light, and as synchronicity would have it, i was reading Rachel Ehrenberg's Beware The Long Tail in this month'sScience News.
Upon hearing of the collapse of Lehman Brothers, she writes, H. Eugene Stanley, a physicist at Boston University, had been expecting it!
“Many economists will tell you that the chances of something really big and bad happening are really, really small,” Stanley says. But when viewed through a different lens, he contends, catastrophic events — such as Lehman filing for bankruptcy in 2008 — aren’t exceptional but inevitable.
At the time of Lehman’s collapse, Stanley had been exploring the notion that extreme economic events, the bubbles and crashes of financial markets, might be described by a mathematical law — a tidy law, like acceleration due to gravity. And he isn’t the only outsider who has had an eye on the markets. Scientists from a range of fields have been poring over financial data, finding some curious patterns in the process.
These patterns suggest that standard economic models based on the notion of equilibrium — markets will fluctuate but then settle down like the surface of a still pond — may not capture the whole story. Freak events may be a normal part of long-term economic behavior. If that’s true, then the mathematical methods guiding Wall Street’s estimation of risk are seriously flawed, offering a dangerous false sense of security.
i have always regarded economic theory as something akin to Hari Seldon's psychohistory, as well as the limits of the speed of light: No man can create absolutes that cannot be surpassed simply because we are not the alpha and omega omniscient being we delude ourselves to be.
There has been a cult of physicists who have proclaimed neutrinos travel faster than the speed of light, and now that it has been proven, the scientific establishment is in a mad rush to disprove it...much like the old guard must have done a century ago since Rutherford's tin foil experiment showed that there was a lot of empty space in atoms. The scientific community today would sooner believe the existence of dark matter than a virtually massless particle could exceed their hallowed speed of light--contrary to common belief--there aren't many original thoughts in science.
Discounting extreme events as improbable is a long-held tradition in economics, notes Stanley. Many mathematical models assume that financial data, such as changes in the price of a stock, fit what is known as a Gaussian, or normal, distribution — the good old bell curve. Most data cluster around an average. Move to either side of the average, and the data points become increasingly scarce, tapering off in a predictable way. A blizzard in July or the Dow Jones dropping 20 percent in one day are considered so rare that they might as well be impossible.
Which brings us to Hari Seldon's psychohistory.
In Asimov's Second Foundation, The Mule is that blizzard in July, that day the Dow drops 20%
The long tail Ehrenberg uses in her title is illustrated thusly:
The black curve is the way a Gaussian curve is plotted: The Gaussian bell’s roots in finance go back to work by French mathematician Louis Bachelier, who modeled changes in share prices in the early 1900s. Bachelier recognized that some of his model’s assumptions were flawed, including the premise that the probability of extreme events is vanishingly small (he reportedly called such events “contaminators”). Yet these assumptions were preserved in later models, including the Black-Scholes formula, which underlies much of Wall Street’s estimation of risk.
Our Mule was was sworn in thirty-odd years ago...and make no mistake, Ronald Reagan was every bit as disruptive to natural evolution of economics as the Mule was to Hari Seldon's psychohistory, alas, there is no known second foundation [that i know of] to get us back on track again 
With truly Gaussian distributions, measurements that appear extraordinary, such as a person a mile tall, are probably flukes; perhaps the measurer didn’t know how to use a ruler or made a mistake in writing down the number. Termed “outliers,” these data points are often thrown out of the analysis.
But when it comes to financial data, a growing body of research suggests that outliers can be more like babies than bathwater. Such events may still be very rare; Stanley says that the probability that stocks would crash as they did on Black Monday in 1987 was “as close as you can come to never.” Yet Black Monday still happened. And while much of finance does behave within the bounds of a normal distribution, ignoring the rare, large events doesn’t capture reality.
Being more physicist that economist, Mr Stanley fails to see that mile tall people are not only being created regularly in the marketplace: Apple, Google, Groupon and eventually Facebook to name a few, but now the market is predicated upon the thesis that there be monsters out there...and everyone wants to land one of the fabled beasts in an IPO that goes up 300% by the closing bell.
Half-a-century ago, Benoît Mandelbrot, father of fractals, made a similar observation in the 1960s after examining variation in cotton prices. He later called the Gaussian distribution “a model child,” one “which is commonly called ‘normal,’ but in fact deserves less and less to be considered as such.”
So it's no wonder two of Stanley’s graduate students spotted a signature long tail in U.S. market data. The team analyzed every transaction for 1,000 stocks in the major markets, looking at how much the prices of those stocks changed and how often. The more than 200 million data points included a handful of extremes, causing the graph to splay outward.
Instead of dismissing such tails because they don’t fit the models, researchers might need to rework the models because they don’t fit the data, Stanley and others argue. “The model should really be driven by the data,” he says. “For a physicist, there are no outliers. If I saw a glass of water float up in the air, we’d have to re-examine the law of gravity.”
These deviations is what is responsible for the red curve--which leads to a greater and more uneven distribution of the wealth--and that has nothing to do with class warfare, but more with incompetence and greed.
The incompetence enters the picture via the Supreme Court's ruling that corporations are people--a move that consolidates power into the hand of a cabal of capitalists who seem hellbent on re-creating a czarist Russia, as well as the high-frequency trading junta, which in essence renders your 401k plans the equivalent of buying a scratch off lottery ticket for $10 and praying you hit the $11 jackpot 
Many of the police down at Zuccotti Park don't realise that their excessive pensions are now under fire and dependent on the hob creators--and as Mitt Romney recently showed--most of the jobs they create are for maybe legal landscapers??
======================================================================================
Outside viewers can post comment below too, unfortunately, you'll have to leave your e-mail address...but you CAN LINK to anything you want, so THAT should make the bullshit this site runs you through more bearable 
======================================================================================
and you have few newspapers with that picture! and NONE of the Fox "news" propaganda machine
Straight up--i wasn't even aware of Troy Davis until he hit Twitter last night...and since i found it amusing that his 
Check this out: from t
Recent Comments