In today's NYTimes there was an interesting corollary to the social network piece in the magazine section (I read the magazine section on Saturdays usually....) This article was about the collapse of financial markets and what, or who, was responsible. While it has been fashionable to blame the "quants" and their fancy formulas, this article argues that perhaps the failure of the models was not in their economic predictions but in their failure to understand group behavior. Panic spreads just like obesity. Financial engineers (got to love that term) are now thinking that maybe they need to include estimates of human behavior into their econometric modeling.
Quoting from the Times article, Unboxed, "Financial markets, like online communities, are social networks. Researchers are looking at whether the mechanisms and models being developed to explore collective behavior on the Web can be applied to financial markets." A former physicist says this effort is "intriguing but awfully ambitious." Do we need to model life? Will we ever be happy to just sit back and enjoy it?
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