Paul Jorion's Blog

Category: Human complex systems

  • Human Complex Systems and the Current Mess

    S&P’s downgrading of US’ credit rating
    The American economy
    The euro zone crisis
    The riots in Britain
    How to get back on complexity ?… Read the rest

  • IGNORING LESSONS LEARNT

    My most recent column in the French daily paper Le Monde : Le risque systémique court toujours. As usual the translation is due to Bénédicte.

    Lehman Brothers’ bankruptcy, on September 15, 2008, and its aftermath – more than one trillion dollars being injected into the financial system – have caught people’s attention about financial firms “too big to fail”, i.e. that their bankruptcy is bound to automatically cause the downfall of the entire financial system.

    On June 15, the Bank for International Settlements in Basel, that is to say “the central bank of central banks”, announced the measures it … Read the rest

  • My lecture at the Zermatt Summit, on the 16th of June 2011

    Now online.

    I defend my proposal of a prohibition of wagers on the evolution of prices (which was standard in the 19th century) within the framework of a Constitution for the Economy.

    … Read the rest

  • Healthy / destructive system of capitalism (2d version), by Lambert de Haas

    Guest post. Taking advantage of my interview with Caroline de Gruyter in NRC Handelsblad, Lambert de Haas has put this all together. He’s expecting your remarks to make further improvements.

    “Healthy” / “destructive” system of capitalism (2nd version) on Prezi

    … Read the rest

  • Capitalism’s highs and lows

    I was asked to make the introductory speech at the Conference “Heurs et malheurs du capitalisme”, which took place at Université Blaise Pascal in Clermont-Ferrand on February 4th. Bénédicte has been so kind as to translate the written version of my speech.

    Capitalism’s highs and lows? When we talk these days of its highs, it is because its lows are so much – uncomfortably much – on our mind.

    But what exactly do we mean when we refer to “capitalism”? Many authors merely consider that capitalism is “any aspect of our current economic system”. For example, they mistake capitalism for … Read the rest

  • One-Day Conference : Anthropology of the Crisis of Contemporary Capitalism, Paris, May 3d 2011

    International Study Day

    Anthropology of the Crisis of Contemporary Capitalism

    3 mai 2011, 10h-17h, musée du quai Branly, 37 Quai Branly, 75007 Paris, Cinema Theater

    Convened by Jonathan Friedman (IRIS/EHESS) & Laurent Berger (LAS/MQB)

    Programme

    10h-10h15 Jonathan Friedman (IRIS-EHESS) & Laurent Berger (LAS-MQB) « Introduction: Towards an anthropology of the crisis in capitalism »

    10h15-11h Paul Jorion                                                                                                                        « How to become the anthropologist of the crisis »

    11h-11h30 Discussion

    11h30-12h15 Don Kalb (Central European University, Budapest and Utrecht University)

    « Financialization and Neo-nationalism in the New Old Europe »

    12h15-12h45 Discussion

    LUNCH BREAK

    14h30-15h15 Keith Hart (Goldsmiths University of London)                                                          … Read the rest

  • LE CAPITALISME À L’AGONIE, Fayard 2011

    A couple of weeks ago, my new book Le capitalisme à l’agonie came out, published by Fayard in Paris. Bénédicte has been so kind as to translate the summary I wrote for its backcover.

    Le capitalisme à l’agonie (Fayard 2011). Summary

    In 1989, at the fall of the Berlin Wall, capitalism was triumphant. Deprived by now of any enemies, it had ceased to be just one economic system among others to become the single form under which an economic system could possibly exist. In 2007, a mere eighteen years later, that is for all purposes simultaneously on the timescale of … Read the rest

  • The mirage of a pluridisciplinary “science” of economics

    This is a translation (by Bénédicte Kibler) of my most recent monthly column in the Economy supplement of the French daily Le Monde: Le mirage de la pluridisciplinarité.

    Robert J. Shiller, professor of economics at Yale University, has published recently, along with his wife Virginia, a psychologist, an article entitled “Economists as Worldly Philosophers” (Cowles Foundation Discussion Paper No. 1788, Yale University, March 2011).

    In their joint paper, the Shillers suggest that if economists were “Worldly Philosophers”, the double failure they have experienced in recent years could have been avoided: they haven’t been able indeed either … Read the rest

  • Capitalism (I) – The Veins of the Future

    An English translation of Le capitalisme (I) – Les nervures de l’avenir posted on my French blog on March 2nd.

    In Reason in History (1837), a posthumous work composed from lecture notes, Hegel observes that “ … what experience and history teach is that peoples and governments have never yet learned from history, let alone acted according to its lessons”. This is true: had it been otherwise, no civilization having preserved the memory of those that preceded it would ever have died.

    While failing to learn from history, men have never stopped however trying to decipher it and when reading … Read the rest

  • What have anthropologists to tell about the subprime crisis that no one else has said before?

    Finance is in shambles. It has remained until now under the close supervision of economic and financial theory. In recent years, due to the overbearing dominance of views developed under the umbrella of the “Chicago School” of economics, finance has been regarded as explainable through the combination of a very simplified version of psychology: that of the “homo oeconomicus“, and of physics. The physics in question is supposed to have risen all-armoured Minerva-like out of the embarrassingly simplified psychology hitherto mentioned. This is the tenet of methodological individualism presiding nowadays over mainstream economics and financial theory.

    Human nature, … Read the rest

  • Where this blog stands

    Various commitments on papers commissioned in French have kept me away from this blog. Reward is another factor: with an average of around 30 daily hits on the English blog and 2500 on the French one, vanity has been a powerful drive for concentrating on the French one. Dialogue is another one. If you’ve had the opportunity of looking at the French blog you will have noticed that commentators often engage in lively conversations, with me resting comfortably in the meantime in the bleachers.

    Why is that so? I believe that my reputation as a writer in English is not … Read the rest

  • Would an interruption of the Gulf Stream be reversible? And if so, at what cost?

    I’m blessed with a very popular blog in French. One of the questions that came up lately in my dialogue with commentators is that of the reversibility of major ecological disasters induced by human activity and of the feasibility of reversing such disasters with the tools pertaining to our current technology.

    This is a serious question, a very serious one, and I intend to use the popularity of my (French) blog to push the issue a far as needs be. I’ve chosen one example – so that we don’t get locked in trivial generalities – that of a possible interruption … Read the rest

  • The cunning of Reason

    The very justification of a Human Complex System’s approach to the operation of human societies, implying a continuous explanatory spectrum from the individual (particle) to the cultural or societal levels (field), is offered by Hegel when he writes in Reason in History (*) that

    … human actions in history produce additional results, beyond their immediate purpose and attainment, beyond their immediate knowledge and desire. They gratify their own interests; but something more is thereby accomplished, which is latent in the action though not present in their consciousness and not included in their design.

    Adam Smith’s “invisible … Read the rest

  • A population dynamics approach to the subprime crisis

    One way of looking at the subprime crisis – and by this I mean only the properly real estate–based part of the unfolding drama – is in terms of population dynamics, in terms of three populations of borrowers who first entered the market and then left it in reverse order as the last to come in were also the first to leave.

    In order to characterize these populations I’m resorting to a classification that was introduced – although used for a different purpose – by Hyman Minsky, an American Keynesian economist who was born in 1919 and died in 1996. … Read the rest

  • The reasoning artificial toddler

    I was interviewed earlier today by Richard Adhikari, a journalist at TechNewsWorld, about an Artificial Intelligence project. I didn’t know anything about that project except what would be the title of the article: “AI Program Thinks Like a 4-Year-Old”.

    There is an excellent summary of what I had told the journalist:

    “I’m always suspicious of this kind of thing where they’re dealing with children,” anthropologist and sociologist Paul Jorion told TechNewsWorld. “I always have the feeling that there are some major issues they haven’t been able to solve yet.”

    Jorion developed ANELLA, the Associative Network with Emerging Logical and

    … Read the rest

  • The end of trust in the subprime crisis and how to model it

    The subprime crisis is often explained in terms of trust: one day trust between financial counterparties vanished and here was a crisis. Explanations in terms of “market confidence” refer in fact to two distinct phenomena, one being indeed trust and the other one being more plainly straightforward profitability. Let me start with profitability. Subprime loans had been repackaged in their thousands so as to mimic a straightforward obligation, be these Asset-Backed Securities (ABS) or – in a second step – collateralized Debt Obligations (CDO) comprising ABSs. When the risk-based premium embedded within the interest rate charged on a subprime mortgage … Read the rest

  • The subprime crisis at UCLA

    I’m happy with the way things worked out yesterday, March 8th, at the UCLA Complexity Science Conference with my paper: The Subprime Crisis: A Human Complex Systems Phenomenon.

    Of course, trying to squeeze the whole crisis into an hour (1 ¼ with John Bragin’s express permission), it turned out I had much too much material. I don’t think personally that slide shows have enough meat to show that they can get circulated without their author fleshing them up. This is why I’m not communicating as of yet what I had to say but I’ll be working in the coming … Read the rest

  • Pricing models: why the good ones are useless and the true ones, priceless

    I’ve mentioned already in Agents using financial models and the “human cognitive cocktail” a number of pitfalls linked to the task of modeling the subprime crisis in a Human Complex Systems perspective, especially those related to agents’ partial understanding of the models they’re using or in errors they’re making when using them. I’ve also hinted at some models making unwarranted claims about their ability at forecasting. I should also mention – as I was recently reminded – inflated assumptions about the virtues of diversification or, I should rather say, at the capacity of the markets to remain optimally diversified.

    I … Read the rest

  • Agents using financial models and the “human cognitive cocktail”

    I’m working on the paper to be given at the Human Complex Systems’ one-day conference on March 8th. I don’t want to divulge prematurely any scoop but at the same time I’d like to share some of my puzzlement as I go, and as if thinking aloud.

    Rube Goldberg machine

    To recap: I’m toying with the concept of a large – as complex as need be – model of the subprime crisis. The easy parts are those which are already modeled of that Rube Goldberg machine (see diagram), like the cash flow structure (of variable complexity) of the financial instruments at the … Read the rest

  • The subprime crisis: a human complex system phenomenon

    I’ll be speaking at UCLA on Saturday March 8th, 2008 at the
    Human Complex Systems – UCLA Four Campus Complexity Conference,
    UCLA Haines Hall 352. The conference starts at 9 AM, my own talk is at 2:30 PM.

    If it looks like proposing an entirely new paradigm for financial studies, that’s because that’s precisely what it is. Hope you can join!

    The subprime crisis: a human complex system phenomenon

    Explanations of the subprime crisis typically combine partial explanations, illustrations, “speaking” analogies, etc. treading at different levels: from the “elementary particle” level where the consumer and the financial trader are

    … Read the rest