Comments on: When Taleb met Davies http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/ A slice of lime in the soda Sat, 18 May 2013 04:10:35 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: NassimNTaleb http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/comment-page-1/#comment-44107 NassimNTaleb Tue, 23 Oct 2012 08:18:11 +0000 https://blogs.reuters.com/felix-salmon/?p=19102#comment-44107 Actually a positive first derivative for the utility function (harm is bad, etc.) + stochasticity giving a nonzero probability for the state may be sufficient to reverse the allocation. Actually a positive first derivative for the utility function (harm is bad, etc.) + stochasticity giving a nonzero probability for the state may be sufficient to reverse the allocation.

]]> By: riverdawg http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/comment-page-1/#comment-44095 riverdawg Mon, 22 Oct 2012 19:42:33 +0000 https://blogs.reuters.com/felix-salmon/?p=19102#comment-44095 The "aversion to fat tails" argument requires more than simple risk aversion but, rather, "temperance" or a negative 4th derivative of the utility function. Aversion to downside risk, which is what many people often seem to mean when invoking "fat tails" arguments, requires a positive 3rd derivative. The “aversion to fat tails” argument requires more than simple risk aversion but, rather, “temperance” or a negative 4th derivative of the utility function. Aversion to downside risk, which is what many people often seem to mean when invoking “fat tails” arguments, requires a positive 3rd derivative.

]]> By: JOtt http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/comment-page-1/#comment-44094 JOtt Mon, 22 Oct 2012 18:08:56 +0000 https://blogs.reuters.com/felix-salmon/?p=19102#comment-44094 This was fascinating. More like this, please. This was fascinating. More like this, please.

]]> By: Christofurio http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/comment-page-1/#comment-44067 Christofurio Mon, 22 Oct 2012 03:31:18 +0000 https://blogs.reuters.com/felix-salmon/?p=19102#comment-44067 Evolutionary theory and economics are old friends. It was Malthus, a great economist, who got Darwin thinking along the lines of his eventual theory, and Spencer's role as the Ur-evolutionist encompassed all branches of knowledge. But of course that isn't a pedigree within which Gould would have placed himself. An irony here: Krugman sees himself in much the same way that Gould saw himself -- each is a properly credentialed expert in the field -- Gould for example was the Alexander Agassiz Professor of Zoology at Harvard from 1982 on, and each could have done the technical insider stuff (about, say, the taxonomy of land snails) all his career, but Gould like Krugman preferred to talk to the broader educated public about the nature of his field. Despite those similarities, or perhaps because of them, Krugman seeks to peg Gould as a phony. Evolutionary theory and economics are old friends. It was Malthus, a great economist, who got Darwin thinking along the lines of his eventual theory, and Spencer’s role as the Ur-evolutionist encompassed all branches of knowledge. But of course that isn’t a pedigree within which Gould would have placed himself.

An irony here: Krugman sees himself in much the same way that Gould saw himself — each is a properly credentialed expert in the field — Gould for example was the Alexander Agassiz Professor of Zoology at Harvard from 1982 on, and each could have done the technical insider stuff (about, say, the taxonomy of land snails) all his career, but Gould like Krugman preferred to talk to the broader educated public about the nature of his field.

Despite those similarities, or perhaps because of them, Krugman seeks to peg Gould as a phony.

]]> By: NassimNTaleb http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/comment-page-1/#comment-44047 NassimNTaleb Sat, 20 Oct 2012 22:21:51 +0000 https://blogs.reuters.com/felix-salmon/?p=19102#comment-44047 Hihi; thanks a million. What I meant by linearity of preferences: when you make a decision, and there is a probability of a severely negative state (from fat tails), a nonlinear utility function would assign a huge weight to such a state and affect your decision. The Ricardians miss it because they do not envision the probability of these extreme events (nor the possibility of model error which would assign the possibility of such a state). They assume the relationships are deterministic, or not stochastic enough. Hihi; thanks a million. What I meant by linearity of preferences: when you make a decision, and there is a probability of a severely negative state (from fat tails), a nonlinear utility function would assign a huge weight to such a state and affect your decision. The Ricardians miss it because they do not envision the probability of these extreme events (nor the possibility of model error which would assign the possibility of such a state). They assume the relationships are deterministic, or not stochastic enough.

]]> By: GRRR http://blogs.reuters.com/felix-salmon/2012/10/19/when-taleb-met-davies/comment-page-1/#comment-44042 GRRR Fri, 19 Oct 2012 22:39:56 +0000 https://blogs.reuters.com/felix-salmon/?p=19102#comment-44042 Who knew that a conversation could be conducted, 140 characters at a time? LOL! :OD Who knew that a conversation could be conducted, 140 characters at a time? LOL! :OD

]]>