back to article How the fate of the US economy rests on a Dell workstation

The global economy is teetering on the brink of disaster. So, you might think the quants and smart-alecs of the financial industry would have a giant supercomputer humming away somewhere, processing zillions of what-if scenarios per second and sucking in all manner of real-time economic data from the global markets and …

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  1. Anonymous Coward
    Dead Vulture

    Modelling the global economy isn't rocket science?

    As I think Carmack said, "Rocket science isn't rocket science".

    Modelling the global (or even national) economy I think would class as hard enough to be "rocket science".

    It's not just a matter of buying a big enough computer. You have to, like, write a program and shit.

    Economics as a predictive science is a bunch of utter toss compared to, say, Newtonian dynamics. You can't just "simulate" it.

    So no, it isn't rocket science, it's about a million times harder.

    BTW, if you really don't know what it means to take a loglinear approximation around the steady state and solve it in MatLab just STFU on this topic.

    BTW2, if you read Beer you'll see that there might be ways of modelling an entire economy on a computer, which aren't rocket science, but which will also run happily on a Dell.

  2. goggyturk
    Flame

    So what?

    Playing the Devil's Advocate: given that these supercomputer simulations failed to predict the current mess we're in, why should we trust them to get us out? It seems the model Bernanke created actually works at some level.

    Sometimes in these situations, less is more. If this workstation model *actually works* most of the time for short term predictions of some part of the economy, then it should be used.

    In my experience, simulation methods often lack transparency and usually reflect the prejudices of the people who set the model up.

  3. Xander
    Thumb Down

    People Science

    It's not rocket science, sure. But the reason the financial sector isn't modelled is becuase it's Trust Based. Any monkey with even a slight knowledge of banking knows this.

    How one would model something as arbitrary as "trust" in a spreadsheet is utterly unknown to me. Never mind you'd have to add in the effects of a news story. I'm pretty sure the only HBOS went under was because of a few choice whispers in the right ears.

  4. Anonymous Coward
    Anonymous Coward

    Quote of the "black <your_favourite>day"

    "There are two sides on the balance sheet: Left and Right. In the current situation there's nothing right on the Left, and nothing left on the Right."

    (from Professor Leif Sjöblom, IMD, Switzerland)

  5. Hein Behrens
    Thumb Down

    The assumptions

    The real problem is that econometric modelling is based on assumptions not facts. It is not physics. So you run your model and a month later all the employment or gdp figures get revised by a few percentage points, this happens often the adjustment of macroeconomic indicators.

    So rocket science stays the same this is like doing rocket science without the facts.

    Thus the fashion for graphing predictions with a probability of error so it all looks good and then Russia invades Georgia and there goes your model like a blown up rocket.

  6. Anton Ivanov
    Thumb Down

    So what redux

    If the equations are right it does not f***ing matter if they are computed on a calculator or abacus (or its modern equivalent from Dell).

    In fact, I am more inclined to believe a model that is using well known math than a model that is feeding numbers into a huge black box.

    There is a fundamental reason to it - the type of mathematical problems that describe a stock market actually have the ugly habit of becoming unstable as you increase the "precision" of the calculation (usually the timing parameter). So the usual "improvement" you get from a supercomputer is actually one of the best ways to shoot yourself in the foot. Instead of getting a less precise, but realistic result you can get rubbish due to the problem going stiff while the supercomputer is trying to crunch at it using something that is essentially a non-stiff algorithm.

  7. Branedy

    Excel Macros

    This isn't so bad, at least the economic accelerator isn't just a bunch of Excel Macros like most of the financial world is based on ;-)

  8. Justin
    Linux

    640k

    It just goes to show that 1GHz and 1Gb RAM is more than enough for anyone.

    The really clever bit is the maths (pencil and paper stuff) to approximate a model. Once you've got that worked out, the software model is relatively easy. Did you know you can do Mandelbrot Sets in Excel, you can do garden planning in Excel. You can even write books in Excel. It's only for stuff with huge datasets (like weather, finite element analysis, or oilfield simulations) that you need a supercomputer.

  9. Outsider
    Coat

    Heisenbergs Uncertainty Principle?

    Economics modelling...... as soon as the model is considered reasonably good the output of the model is a factor in the behaviours the model is trying to model....as others try to game the model by exploiting its weaknesses.

    There is no modelling..... the suits are doing what suits do... throwing money at broken things, only this time its suits throwing money around that caused the break.

    Mines the one with the dusty Matlab CD in the pocket

  10. Anonymous Coward
    Flame

    Oh come on

    Do you have any proof that more compute power would help anybody out in any way in this situation? Or a plausible explanation of why it might? Or an implausible explanation? Anything...? That would have been good to put in the article.

  11. John Galt

    HPC side of things

    Here's more on the subject:

    http://www.hpcwire.com/blogs/Making_the_Quantitative_Models_Work.html

  12. Neil Barnes Silver badge
    Boffin

    Nah, digits are too high-tech...

    We need a Moniac! http://en.wikipedia.org/wiki/MONIAC_Computer

  13. Anonymous Coward
    Alert

    EconoSim 1.0

    10 PRINT "WE'RE SCREWED"

    20 GOTO 10

  14. Anonymous Coward
    Flame

    "This seems like a reasonable assumption, right?" Wrong!

    >"This seems like a reasonable assumption, right?"

    Uh, no, it doesn't. It's transparently derived from the unproven and baseless (at least in terms of any evidence you have shown) premise that you /need/ a supercomputer for the job.

    Your assumption that blindly shovelling money into a ludicrously over-specified machine for the task at hand will somehow get it done "better" , or "faster", betrays a lack of engineering experience. Matlab on a workstation is probably a perfectly good fit to the model at hand, but you wave around the word "supercomputer" like some kind of magic talisman. This is a fine example of cargo-cult programming. I must remind you that just because it takes a woman nine months to make a baby does not imply that a team of nine women can make one in a single month.

    Are you a manager by any chance?

  15. Tobin

    Pointless anyway

    The predictions are the reason we're in the mess we're in. Simulations are based on idealised economic models. They don't pay attention to anything so irrelevant as real life trader action. They're great when everything's shiny but irrelevant as soon as something unexpected happens.

  16. frank

    scary thing is...

    that this is actually a relief to hear after what I read last week.

    http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html

    'In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. "It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."'

  17. Anonymous Coward
    Alert

    Simple really

    Predictive economic models don't exist - especially for unusual and desperate situations with no transparency like we're in right now.

    So if your predictions are going to be crap, why not produce the crap at low cost on a Dell? Those supercomputer thingies aren't cheap you know.

  18. Dennis
    Joke

    How the fake US economy

    Now why did I read the title as "How the fake US economy ..."

    Fake because these merchant bankers have been gambling using other people's money. Worse. Other people's money that they hadn't yet earned.

    http://themarpleleaf.blogspot.com/2008/07/cow-economics.html

  19. Tim Bradshaw Silver badge
    Stop

    Rocket science

    No, this isn't rocket science: it's much harder than that. Rocket science is based on the application of some well-known physical laws to engineering systems. Depending on the laws and the systems, that may be the sort of thing that you can usefully throw a supercomputer at.

    In the case of economic modelling no one actually knows the laws, and in fact there is no real evidence that there *are* any laws in the sense a physicist would like, because the game is changing all the time. No one knows the boundary conditions either. And the whole system is (almost certainly) nonlinear, with resulting SDIC and chaotic behaviour. Finally, there are these awkward "people" who behave in ways which are often very hard to predict.

    There just is no evidence that throwing computational power at a problem like this will help you at all. After all there were some organisations who had very deep pockets - plenty deep enough for quite significant computing facilities - and would have gained considerable advantage from simulations, if those simulations were any good. I'm sure they ran them: somehow the results they got failed to save them from bankruptcy.

  20. Anonymous Coward
    Boffin

    It wasn't $700 billion

    That was just the bailout figure, because the Fed took $630+ billion and gave it away earlier this week when the bailout was turned down.

    So that makes a total of $1.4 trillion or thereabouts.

  21. Thandar

    Hmmm

    Maybe they are not telling us what the computers are showing, I can't imagine the results would be very nice...I can't see this bailout being anything but a band-aid

  22. Nic Brough

    Oh FFS

    Half of the problem with the market was that they were relying on models which were not complete (and never will be).

    The economy is mathematically chaotic - you might be able to get a model which can give you trends, especially during the more stable times, but they fall apart randomly, especially at tipping points and during market turmoil.

    If you are going to try to base your trading on models, then only the simplest ones that you can nail to actual events should be used. Simple GENERAL models like "conflict near oil fields means higher oil prices" or "lending money to people who can't afford to pay it back is dumb". If you think any economic model can be more accurate than rules as simple as them, then you're fooling yourself.

  23. Anonymous Coward
    Anonymous Coward

    Bigger, in this case, actually *might* be better...

    "maybe the thing to do is get Gilchrist a few more grad students, a baby supercomputer *like* *he* *says* he will need to be able to pump real-time data into the model, and get us to a point where we can do some more sophisticated "what-if" modelling on economic policy. Put an earmark for the project right into the bill as it passes from the House to the Senate.

    "I studied rocket science, and I can tell you - this ain't rocket science."

    See, the Good Professor does think that more cycles and more data input monkeys will allow the model to be more accurate and timely.

    What is not rocket science is that there is a model which appears to make sound predictions and it would be sensible to actually feed and juice it to its potential to check whether adding another trillion to the national debt is actually going to have the desired effect.

  24. Steve

    That's why Paulson didn't want any questions

    He was obviously planning to use the $700bn for a PC upgrade.

  25. Anonymous Coward
    Boffin

    Supercomputer bile

    Yes you could do any one of the following things and get the required results;

    1) Get a thousand chimpanzees in a room to sit at desks with pencil and paper and watch what happens.

    2) Do it yourself on an abacus

    3) Use a Dell workstation

    4) Use a supercomputer

    5) Use a PS3 grid network

    IMO it depends how many things you want to calculate to achieve a given result and how fast you want it all done by.

  26. Dave
    Boffin

    Nobel + reality = not much

    Economics is the most inexact of sciences. In what other field can you be wrong 100 percent of the time, get the Nobel prize and be utterly irrelevant to the vast majority of living beings on the planet? (Oh, I just described Al Gore, didn't I.. Oops!)

    Seriously, economics makes sociology look like the hardest of sciences by comparison. I'd love it if the current environment elevated the field and caused investment (ha!) in quantitative methods and allowed accountability to be introduced into economic models.

  27. Gareth
    Stop

    Economics is a soft science...

    Economics is closer to group psychology or sociology than it is to physics.

    The only place where economics generates enough hard data to require any kind of serious computing power is the analysis of historic data to generate patterns from which we may be able to derive rules or laws from.

    There is a school of thought that if you can analyze those historic patterns well enough you can begin to spot them in their infancy - whether for profit, or to avert economic disaster.

    Unfortunately economic events are rather unpredictable, with a vast number of factors affecting the outcome (from consumer confidence to the weather in Florida) - so any current computer simulation is going to be a very vague and inaccurate guess. This is borne out by the less than spectacular results that the quant funds produce, despite recruiting some of the world's smartest maths and physics boffins, not to mention having the multi-million dollar supercomputers.

    So the only reason to throw a multi-million dollar supercomputer at the figures is to get Bernanke's Matlab toy to run a bit faster - and a wrong guess produced twice as fast is still just as wrong.

    It sounds like the Financial Accelerator is more of a basic tool to test assumptions before applying brainpower to them, or to demonstrate to other people what you're thinking. This makes it little more than a very specialized variant of Powerpoint than a serious analytical tool.

  28. Joe Harrison

    You do need a computer but only to work out the planetary orbits

    http://en.wikipedia.org/wiki/Financial_astrology

    "Although astrology is generally regarded in mainstream Western thought as having no logical basis, advocates of the efficient market hypothesis would make the same claim with respect to most forms of fundamental analysis and technical analysis."

  29. Twm Davies

    I assumed they still used a MONIAC machine?

    Put punched holes in its pipes

  30. John Savard Silver badge

    One alternative

    These days, with AMD's Stream Computing, or Nvidia's CUDA, supercomputer-like power is potentially within the reach of people with a moderately high-end gaming machine including the right video card. Take, say, an ASUS M3A motherboard with a PCI-e 16x slot, and an ATI 4850 from any number of manufacturers...

  31. Anonymous Coward
    Thumb Up

    Re:EconoSim 1.0 @AC

    Brings back memories :-)

  32. Daniel
    Boffin

    pfffft.

    read almost any book on chaotic systems. then you might see that gigamaflops has sweet FA to do with it.

  33. Brian Miller

    How about open-sourcing the project

    Wouldn't it be nice if they would publish what they are using?

    Of course, it really doesn't matter when, as posted above, they are using arbitrarily big numbers for grins and giggles, and the plan consists of lots of money and no oversight or bookkeeping.

  34. Luther Blissett

    Ride of one particular valkyrie

    There goes a very curious fact about Bernanke. How uncanny that the Fed should select him to replace Greenspan. Almost as if the Fed were expecting to need his specific expertise down the line. But I wonder if they read his CV and noticed a predilection for riding in helicopters and throwing lots and lots of bits of paper out the window (not confetti).

    Which recent history tells us that his model must be junk because any input data available today is hyperreal, if not actually surreal. Which is exactly where the problem is. You cannot regulate a derivatives market which is called over-the-counter but has all the transparency of in-the-back-alley transactions conducted after dark.

    The begging on bended knee of $700bn is a clear indicator that no clean-up of derivatives is going to take place.

  35. Anonymous Coward
    Anonymous Coward

    Financephalograph

    So we are really not much further on than in 1949!

    See http://en.wikipedia.org/wiki/MONIAC_Computer, for the true power of a REAL (very analogue) computer model of the economy, the MONIAC (Monetary National Income Analogue Computer) "also known as the Phillips Hydraulic Computer and the Financephalograph" Created in 1949 by the New Zealand economist Bill Phillips to model the national economic processes of the United Kingdom, and built in his landlady's garage, the MONIAC used tanks and pipes to channel the flow of water (and, in a later version I believe , honey) representing the flows of capital and income round the economy. Perhaps the original could be resurrected from the Science Museum to save the Brirish economy in the absence of any serious computer modelling to extract us from the current crisis.

  36. Tom Silver badge

    economic modelling?

    The city doesnt model the economy - they'd realise they're parasites if they did.

    Or perhaps they do and dont care.

    I have been led to believe that the treasury used three different models to predict the economy in the early 80's. Two contained keynsian thinking so , despite their greater accuracy, Thatcher had them thrown out.

    Not that anyone needed a computer model to guess that what has just happened would happen.

    Positive feedback 101 "its uncontrollable but we can bleed the desperate for a while"

  37. J
    Paris Hilton

    Economics, a science?

    How generous of you lot...

    It's just poor man's math for now, I'm afraid. It might become a science, maybe one day, if we learn enough about it. Or not.

  38. This post has been deleted by its author

  39. Colin Coleman
    Coat

    Good plan

    Excellent suggestion - a supercomputer running really mind-bogglingly complex models in real-time is clearly what we need here. If only we had such tools available to model the risks inherent in complex financial derivatives in the first place we probably wouldn't be in this mess. And maybe get some rocket scientists, too. And maths PhDs. Lots of 'em. Yeah! The more the better. In fact, we should get thousands of very clever people who are good with sums but not so hot on statistics but who think that maths and stats are the same thing, and we should get them to build a simulation that is so complex no one can possibly hope to understand it (making sure it's based on a number of poorly understood and probably wrong assumptions of course) that will give us a simple set of numbers we can plug into our economy repair machine with total confidence to fix the current crisis and save the world.

    After all, that got is into this mess so surely it will get us out, right? It's like so totally obvious, but clearly everyone but me is an idiot because they can't work this out and I can. Man, I'm so awesome!

    What an awesome article!!!

    Seriously, though, I hadn't realised that I had wandered on to slashdot by mistake. I thought this was El Reg! But since I'm here - Macs rule and Linux freetards are losers and Windoze is beneath my notice.

  40. James Gibbons
    Paris Hilton

    And then you have an idiot screw it up

    Well the bill just passed so we will see where it goes. The following actions are why the models will never work:

    Insurers dive on Reid's 'bankrupt' quote

    http://money.cnn.com/2008/10/02/news/companies/insurance_stocks/index.htm

    Paris because she really knows about screwing things.

  41. Chris G Silver badge

    Economic Modeling/Science? Bollocks!

    To have a science means you need theories( so far so good) those theories then need to make predictions which are consistently borne out. You now have a theory that appears to work and will do so until a better theory comes along or it fails to make a prediction that is in agreement with the evidence.

    It is not possible to do that with psychology, sociology or economics, because in these disciplines there exists no rigidity, any prediction you may care to make will be based on a set of conditions that have probably changed by the time you have finished describing them, so don't bother.

    The problem with mathematicians is they depend on maths to answer every problem, and it won't.

    Stick with the Dell or better still, a few honest businessmen with intuition and acumen, don't use accountants, managers, bankers or politicians, they are there to help or hinder businessmen but they are not businessmen.

  42. Bounty

    Did you not make the connection to weather?

    Hello, is this thing on? We don't know every where every butterfly will flap it's wings, but we can make useful climate models. Is it a little voodoo? Yes. Is it perfect? No. Does it get better with more compute time? Yes. He stated it takes hours to run a simulation. Do it faster and you can do it more times, get a better average. Or try altering a different variable, or set of variables. More data = better match historical record = better predict future = more stability for us.

  43. Sureo
    Paris Hilton

    Unfortunately economic events are rather unpredictable...

    I have a good random number generator you can use.

  44. Frumious Bandersnatch Silver badge
    Boffin

    This is a job for ... MONIAC!

    http://en.wikipedia.org/wiki/MONIAC_Computer

    It's even got pumps to implement feedback loops!

  45. Mike Lovell
    Joke

    @goggyturk

    "Playing the Devil's Advocate: given that these supercomputer simulations failed to predict the current mess we're in, why should we trust them to get us out? It seems the model Bernanke created actually works at some level."

    What happened was that they finished the program a couple of years back, ran it on the supercomputer and then got their management to take a look at the results, he said...

    - "What the hell is this? Economic meltdown, credit crunch, massive forclosures, established banks going under - Go back and redo it, this is total garbage"

    The rest is history.

  46. Bill

    It's not the size, it's how you use it

    In neuroscience--not too far off economics in complexity-- I've done both computation-heavy simulations and also much simpler ones. But much of the heavy computational horsepower is wasted unless you are very, very confident of *all* the parameters and equations you're simulating, which probably isn't the case for macroeconomic models.

    In fact, there is a disadvantage to using supercomputers on approximate models: the supercomputer lends credibility where it isn't deserved, and laypeople--nay, even journalists--might be fooled into believing the results.

  47. Matt Crerar
    Pirate

    model the market?

    How the heck can you expect someone to model the market - a system based completely on irrationality and human behaviour?!? If someone had done that they'd be pretty rich/screwed the stock market by now. It's the Physics grads head-hunted by the hedge-funds with no sense of economics or moral consequences that got us into this mess.

    The first person to try and treat economics as a science was Marx. Now it's just mirco economics they look at as a science. Not the big picture. Not only is it pretty impossible to model the global economy but they wouldn't like what they saw if they got anyway close.

    Skull & Crossbones because finance capitalism is piracy.

  48. Captain DaFt
    Coat

    @ goggyturk

    "Playing the Devil's Advocate: given that these supercomputer simulations failed to predict the current mess we're in, why should we trust them to get us out? It seems the model Bernanke created actually works at some level."

    There's the story about some shipwreck survivors on a deserted island that discovered a crate of canned food washed up on the beach.

    After their intial elation over the discovery, came the grim realization that they had nothing to use as a canopener.

    While they discussed various possible methods to open the cans, one fellow, an economist, kept snickering louder and louder until he was roaring with laughter.

    "What's up with you?" aked one of the others, "Why aren't you helping instead of laughing at us?

    The economist cleared the tears from his eyes and answered,"Because the answer to the problem is so simple and none of you see it. All you need to do is assume there's a canopener!"

    And that is why we're in the mess we're in today. If the projections don't meet the economist's goals, he'll just plug in assumptions until they do, and plow blithely on.

    (Two words from the past: "Voodoo Economics" It's kind of a redundancy.)

    And where is that WTF? icon?

  49. Adrian Esdaile
    Flame

    Didn't they read 'Chaos'?

    James Gleick's 'Chaos' was all the rage back when I was an undergrad, in er, 1989. I think he said that global ecomony was as complex as weather...

    So why are these economists using Dells? Because Mercedes-fucking-Benz logos on your executive platinum cigar-butt bins cost big dollars, baby!

    Bunch of bloody B-Ark colonists if ever there were some.

    Burn, because once we get them all in one building, that's what we'll do to them.

  50. Steen Hive
    Thumb Up

    @Did you not make the connection to weather?

    Quite right, the modelling similarities are many-fold, and there is a case to be made for throwing computing-power at some of the problems.

    However "The weather" is subject to limits imposed by immutables like the laws of thermodynamics, etc. In economics they can and do remove these limits at will - like say, abandoning the gold standard and imposing fiat currency, or invoking an arbitrary "utility function" when results go out of band for example. It's not "science", it's voodoo, and it is a reasonable baseline position to regard anyone who describes economics as a "science" as a fucking charlatan.

  51. Dave Bell

    Whole lot of mathematics

    A huge number of years ago, PC World ran an article on economic models. I think they printed a BASIC listing.

    None of this is new.

  52. ratfox Silver badge
    Dead Vulture

    What faith in super-computers...

    This is like saying to a trader: "If you don't get cell phone calls warning you in advance that the market is about to crash, then you should obviously have a more powerful cell phone"

    What use would a bigger computer be, if nobody knows how to make a more complex model?

  53. Adrian Walker

    No Data, No Simulation

    One of the problems in trying to build a detailed model of the situation may be that much of the trouble results from "over the counter" -- i.e. private -- contracts for swaps etc.

    At an aggregate level, there are some computations (with explanations reaching into data) that you can run at our site, www.reengineeringllc.com . For example, there's a calculation that, if the bailout were given to US households earning under $25,000, each household would receive about $24,000. There's also a calculation that financial instruments have created about twice as much "artificial wealth" as all the real assets in the world combined.

  54. TeeCee Gold badge
    Coat

    One quick read later....

    Got it!

    For an accurate model of the current situation, take one MONIAC, drain out all the water and refill with Golden Syrup. Job done.

    The very sticky one please.

  55. rd232

    Economics

    Yes, let's calculate exactly how fast we're going to hell in a handcart....

    Except that (mainstream) economics is (extremely bad) psychology with physics envy. A supercomputer can't overcome the GIGO rule!

  56. Simon.W
    Boffin

    Can't be modelled on a computer - not quite true

    Quote from New Scientist article from 1997 <quote>But are the machines doing any better than the humans they are replacing? In terms of performance, the Global Bond Allocation Strategy is in the top quarter of investment management funds in the same market</quote>

    This is about an AI/Expert system developed to model financial markets and the decisions real people would make.

    The whole article can be found here:

    http://www.newscientist.com/article/mg15621114.900-trust-me-im-an-expert--would-you-allow-a-machine-to-play-the-stockmarket-with-your-life-savings-well-the-people-in-the-know-are-doing-just-thatsays-clive-davidson.html

    Alternatively from that wonderful place TinyURL.com- http://tinyurl.com/3je5qm

  57. Dave Silver badge
    Stop

    Actually...

    At the risk of going decidedly against the flow, there is a lot to be said for introducing some science to this: for too long nothing significant has been done to model the little guys. All the big corporations, (and Government) seem to think that the smaller companys and the individual consumer have an unlimited supply of cash - they expect year-on-year growth to be above inflation, for ever and ever. I don't believe that this is sustainable, but maybe a bit of modelling might be able to prove this, and get people to act a little more sensibly.

  58. Tim Shoppa
    Black Helicopters

    If you don't know how to do it, you don't know how to do it on a computer

    I once had a boss tell me, after I showed some results from a horrendously complex computer model that neither he or I understood, that "If you don't know how to do it, you don't know how to do it on a computer".

    I would much rather see the fate of the world's economy rest on a model that somebody understood, rather than some ginormous simulation with zillions of parameters that nobody understands.

  59. xjy
    Paris Hilton

    Overproduction crises every ten years or so..

    Same old crises, same old amnesia, same old denial that we can do anything about it.

    Tom mentions Keynes, someone else mentioned the Austrian economists - all very well, but will solve nothing, just prolong the agony. Thatcher threw out the Keynesians cos they cost the capitalists money, and think its stupid to gut the public sector. Only as soon as capitalism is about to implode, what do they roll out but Keynesianism - after millions have starved to death and the rest have been emaciated by unemployment and despair, and are ready to tear the bourgeoisie to pieces and set up a state for everybody and not just the fat cats. Then when things have cooled down, after a world war or two, the fat cats of the world, the Friedmans, Kissingers, Reagans and Thatchers start rolling it all back.

    So much for bourgeois solutions.

    Matt Creat mentions Marx, and he's the only one here to do so. And Marx is the reason bourgeois economics is such shit. Cos carrying on where Adam Smith and Ricardo left off, he used THEIR axiomatic principle of the LABOUR THEORY OF VALUE to show that capitalism was based on a permanent and evergrowing ripoff of the wage-earners and the poor (the working class with nothing to sell but their muscles and brains). So obviously classical bourgeois economics, based on a sound scientific principle was useless for the fat cats.

    Read Volume 3 of Capital for a laugh - the chapter giving the official reports on the financial crises (overproductioin crises) of 1848 and 1858 is a hoot. All the main representatives of the fat cats, the biggest bankers, politicians, manufacturers etc are interviewed, they all give different reasons, and every damn one of these reasons is being trotted out by the same ignorant bastards today.

    Their reason their models, however complex, don't predict any crises is that their axioms, their basic principles are based on regular stable growth - equilibrium between costs, prices, profits, investment etc. Supply equals demand and everything is for the best in the best of all possible worlds. What Marx showed is that these crises are regualr, have scientifically demonstrable recurring conditions for arising, and will continue till capitalism is replaced by cooperative planned production or we all get killed.

    Wars are a constant, and so are crises. Which is why all the lying spineless fat-cat media spend so much of their time white-washing wars and forgetting all about past crises until the next one. Then some of the fat-cat spokesmen are purged or hop out of windows, and everything begins from scratch - boom and bust, bust and boom. Amnesia School of Economics, MBA (Master of Bugger All).

    So till the basics of the model are changed, they can recruit as many nuclear physicists as they like, and use as much computing power as they like, or as many smart missiles or stone-aged countries as they like, and they'll still be fucked.

    (Or maybe Paris has got something up her bunt to save us all?)

  60. Daniel B.
    Boffin

    So that's why the economy's like that

    If you're running the damn sim on an Intel x86, no wonder the model won't work correctly!

    I just can't believe these kind of things are no longer running on real supercomputer hardware like, say, Cray XMP's.

  61. James Anderson Silver badge
    Happy

    False Pecision!

    At least they havnt fallen into the old false prescision trap.

    Given that the model can only be approximate, and, that most of the available data is out of date, inaccurate and out of sync. there really is no point in putting everything through a supercomputing grid and calculating everything to fifty decimal places.

    A correctly programmed dell work stationreally is good enough for this work.

    A triumph of intelligence over gimmicry!

  62. James
    Flame

    Economy goes <snap>

    Anybody who couldn't see the current economic crisis coming from years off has clearly had their head stuck up their hedge fund. Think about what triggered the stock market collapse of 1929 - Bankers loaned money to Investors (strike one) who in turn re-invested that money to try and gain more money (strike two), creating artificial wealth that grew and grew beyond what the economy could sustain. Then, when push came to shove and the banks wanted their money back, suddenly nobody could find it, because the money the investors made never existed in the first place (strike three - get the fuck out!) - ever hear the phrase "paper profits?"

    Fast forward eighty years, and what do we have now?

    Banks loaned money to investors (credit cards/ARM loans - strike one) who in turn used that credit to buy loads and loads of expensive shit to make themselves appear more wealthy (strike two), creating artificial wealth that grew and grew beyond what the economy could sustain. Then, when push came to shove and the banks wanted their money back (hey, that interest rate you had? Yeah - it just went up 20%), suddenly nobody could find it, because the money the investors (i.e. everyone who has been spending without having the slightest idea of what a budget is, not to mention self-control) made never existed in the first place (GTFO).

    Does this sound familiar at all?

    The way I see it, what we're experiencing is the global economy snapping back into place from being over-extended too long by people living outside their means. The unfortunate downside to this is it's going to take more than a few people, jobs, companies, and a substantial portion of the "wealth" in the world with it. Has nobody noticed how hard it is to get by as of late? Did this not occur to anyone else? Almost everyone is on the losing end of this debacle, the difference being some people have more to lose than others.

    Flame because I'm sure that's what I'll get for this.

  63. Herby Silver badge

    Wonderful thing these models

    They are all "perfect". This is a problem with ALL models. The people who run them claim that they are the "end all" of everything. Then they go out and act as if they are.

    Sorry, they aren't. They never will be. At best they will be an approximation, but if the model fails to take into consideration a SINGLE input, it WILL fail.

    Oh, this applies to weather/climate models as well. Sorry AlGore!

  64. Anonymous Coward
    Anonymous Coward

    They are helpful...

    Interesting that we should discount the modelling as useless. It isnt, but its pointless putting up lights at a railroad crossing if everyone is just going to drive flat out through them anyway. You may as well us a desktop computer and a less complex model if both are going to forecast a meltdown and nobody is going to take heed anyway.

    You know a tsumani is likely to happen, you can only really model the impact of various waves.

    You'd expect it to be pure science. Problem is you dont know the extent of the actual earthquake as input. You can only provide scenarios and track the likehood of each occurring.

    Having studied the so-called black art of econometrics and computer science as well, I have seen good models pick fallacy out of what looks like reasoned argument and bad modelling make the case for whatever you'd like.

    Locally they did a repeat of a documentary that aired over a year ago, it showed the then current high loan default rate and the huge problem that was beckoning about now with ARM loans. There were some nice graphs and the impact totally assessable. The issue is you have to model various scenarios, do the bulk of people stay in there and try and cover things, do they walk away.

    Quite frankly, if I can get through the number of scenarios (probably a lot), and better monitor the indicators, then we have a better chance of understanding the extent. The we'd really know if $700B was enough, where the money should be put (ie buying into banks, dropping it from a chopper, funding mortgage relief, giving it directly to Haliburton). US action to buy into banks seems to be copying the UK and European approach, perhaps there bigger systems and models given them more insight into better strategies.

  65. Ropata
    Go

    The best way to model markets is with a market.

    New Zealand boffins have created "iPredict", an exchange where you trade stocks in political, economic and social events. In their simplest form, these stocks pay $1 if an event comes true, or nothing otherwise, and the price these stocks trade for is the prediction.

    This lets humans process information from their unique/varied perspectives, and make value judgments. OK markets ain't perfect, but they're still the best way of harnessing the collective wisdom of a crowd. No supercomputer required.

    https://www.ipredict.co.nz/Main.php?do=help

  66. Paul C. Dickie
    Unhappy

    The UK version...

    The UK version probably "runs" on a Sinclair ZX 80.

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