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Comment: Re:But space expands faster than lightspeed (Score 1) 529

by Nicolai Haehnle (#41647817) Attached to: Physicists Devise Test For Whether the Universe Is a Simulation

Indeed. Saying that the visible universe is shrinking is not exactly accurate, but it captures the gist of what is going on according to current cosmological models, AFAIU. What's happening is that space itself expands uniformly, that is, the same amount of expansion happens at every point in space. Of course, this expansion adds up over long distances, so that regions very far away from us are receding at close to, and then faster than, the speed of light.

This means that we now receive light from galaxies that we will no longer see in the future. This is the sense in which the visible universe shrinks.

On the other hand, we can always see light from as far as the light could have travelled since the big bang, and in that sense, it doesn't really shrink, it just becomes less dense. It all depends on what type of coordinate system you're talking about, and what unit of measurement you're using.

Comment: Re:I hate those types of physicists (Score 2) 529

by Nicolai Haehnle (#41647779) Attached to: Physicists Devise Test For Whether the Universe Is a Simulation

The many-words interpretation of quantum mechanics tells us there are obscene numbers of universes that exist, because the universe creates perfect copies of itself every time a quantum decision is made, except for the quantum decision itself being different in each copy.

That's a widely spread but IMO misleading popularization. When you read more about the many-worlds interpretation, all it's really saying is that the universe really is a unit vector in a (very high-dimensional) complex vector space. As such, many-worlds says that the universe really is a linear combination of all the many possible states that the universe could be in. The linear combination is the physical reality.

Popularization then calls each of these possible states a parallel universe. That's not completely wrong, but it is very misleading.

Comment: Re:Trading's Too Fast When It Ceases to Mean Anyth (Score 1) 500

by Nicolai Haehnle (#41309715) Attached to: More Warnings About High-Frequency Trading

Arbitrage is certainly important, and it should happen on a time scale that is faster than ordinary economic events, because markets need some time to adjust [1]. But it is fairly obvious that there are strongly diminishing returns for society as arbitrage becomes faster. Imagine a hypothetical alternative market which operates on a one minute heartbeat, for example: the market algorithm simply runs a secret auction once per minute at a pre-determined time, with bid prices as fine-grained as one millionth of a cent to avoid some pathologies. My hypothesis is that such a market would be as inconsistency- and arbitrage-free as what we have today, to an accuracy where the difference simply doesn't matter to ordinary investors - where by ordinary investors, I mean actors with an investment horizon that is measured at least in months. So you would have the same benefit to the society while using less resources (resources that are currently used to get ping times down etc.).

At the same time, look at your last argument: HFT traders are basically competing among themselves, but since their response times have to be so fast these days, they are mostly competing to exploit each other's weaknesses and the weaknesses of the trading algorithms of larger investment funds.

In the hypothetical market, competition between algorithmic traders would still happen. But since there is now more time for computation, the emphasis shifts away from hacking to get short response time and instead towards making more intelligent decisions about price. There might be a shift towards more emphasis on evaluating fundamentals, and that can only be a good thing for the efficient allocation of capital.

[1] Incidentally, I suspect that the reason that much of what neoclassicals say about the macroeconomy is wrong precisely because they incorrectly assume fast arbitrage in macroeconomic events.

Comment: Re:Trading's Too Fast When It Ceases to Mean Anyth (Score 4, Interesting) 500

by Nicolai Haehnle (#41300425) Attached to: More Warnings About High-Frequency Trading

It's more and more about what algorithms your "opponents" are using and what your algorithms are set at.

Only if you are in it for day-trading profits. And if you are, well, you deserve to be beaten senseless by some HFT algorithm.

If you're a long term investor, with a time horizon of many decades, this doesn't matter. For example, I have a stock I bought 15 years ago. It has gone up by around 3X in that time. HFT makes no difference to me when I've held a stock over many years or decades. The exact microsecond it sells doesn't matter to me after a period of decades.

The fundamentals are driven by stock valuations, which are based in what people guess about the future of the company. You can be as informed about that as anybody. If you believe a company will do well over the long haul, buy some of their stock. Don't worry about HFT. You don't have to microsecond-time your sale and beat some other HFT algorithm when you've made a lot of money over years, rather than little bit over seconds.

It's more and more about what algorithms your "opponents" are using and what your algorithms are set at.

Only if you are in it for day-trading profits. And if you are, well, you deserve to be beaten senseless by some HFT algorithm.

If you're a long term investor, with a time horizon of many decades, this doesn't matter. For example, I have a stock I bought 15 years ago. It has gone up by around 3X in that time. HFT makes no difference to me when I've held a stock over many years or decades. The exact microsecond it sells doesn't matter to me after a period of decades.

This is a good point. But then the question becomes: what good does HFT provide? A lot of smart people are sucked into that sector because of the money, where they are arguably causing a net loss to society by participating in an arms race that does not produce any real goods or services. Those smart people could in principle be contributing to research and development in areas that actually improve everybody's standard of living, such as medical research and robotics - or perhaps even in economics when it comes to analyzing long-term successes (after all, genuinely improving the capital allocation in the long-term could be beneficially to society, unlike the short-term gambling that is happening these days).

With that in mind, there needs to be a discussion on how best to disincentivize this kind of extremely short-term behavior, where it is via transaction fees or via trading on heartbeats.

Comment: Re:Methinks people don't appreciate the scales her (Score 3, Interesting) 299

by Nicolai Haehnle (#41244461) Attached to: Bill Clinton Backs 100 Year Starship

That's pretty flamebaity, but let me try a reasonable response anyway.

As I see it, the military budget has two purposes: (1) prolong global US hegemony for as long as reasonably possible, (2) stimulate and maintain strategic domestic industries, both in terms of production facilities and in terms of R&D - basically, the military budget is Keynesianism in a guise that appeals to Republicans.

It seems fairly clear that goal (1) can be achieved on a much smaller budget, if that budget is used more intelligently, i.e. not wasted by getting into unproductive quagmires. We can argue about the exact numbers, but just compare the size of the US military budget to the next runner-up country. It's clear that there is much more than enough of a "safety margin".

Goal (2) can easily be achieved by an ambitious space program. Such a program could require domestic production of parts, as well as pretty advanced domestic R&D.

So, obvious political issues aside, I see no compelling rationally justified reason not to shift a pretty significant piece of the budget from the military to space exploration.

Comment: Re:Regulation caused the Great Depression (Score 1) 397

by Nicolai Haehnle (#40909741) Attached to: Mathematician Predicts Wave of Violence In 2020

Skipping to what I think is really the crucial point.

But what kind of confidence are we talking about here? Mostly, we are talking about confidence in future income streams. If, as an employee, I worry about being laid off in the next few months, then naturally I am going to save more - if possible - to have some savings as buffer. Similarly, as an employer, if I worry about landing enough contracts over the next months, I am not going to employ more people. It's all about income streams.

So you're choosing not to agree with me why? The above is not some deep insight, but merely a slightly different model.

I'm not exactly disagreeing with you. Rather, you seem to use "it's all about confidence" as an argument to contradict me. What I am saying is that one of the most important factors in confidence is the confidence of future income streams, i.e. demand.

In other words, it is completely misguided to use confidence-related arguments as a reason to ignore the issue of aggregate demand.

Comment: Re:Regulation caused the Great Depression (Score 1) 397

by Nicolai Haehnle (#40893257) Attached to: Mathematician Predicts Wave of Violence In 2020

Everyone agrees on that. But what is reality here? I just don't buy that our current problems are because we didn't try stimulus hard enough.

I recommend that you go through publicly available data sets, and just look at the scale of the accumulated private debt that collapsed due to the GFC. All that debt recorded previous "stimulus" by private households spending more than their income, and all this "stimulus" then stopped abruptly. We can throw numbers around here, but I think the best approach is for you to just take a look yourself. A lot is available from the St. Louis Fed's FRED database, for other, aggregated data, you might want to look at some of the things that Richard Koo and Steve Keen have collected.

In any case, the scale of the problem was truly mind boggling, and you really have to take a rational thinker's approach to judging how big those numbers are in relation to each other.

Comment: Re:Regulation caused the Great Depression (Score 2) 397

by Nicolai Haehnle (#40893239) Attached to: Mathematician Predicts Wave of Violence In 2020

Even in a do nothing scenario, eventually the uncertainty goes away.

You're missing the point.

To paint an obviously exaggerated picture, if a prolonged global depression causes so much social unrest that the global supply chain disintegrates, then what good does it do if uncertainty goes away afterwards? When living standards declined after the fall of Rome, do you really think people thought that was just fine, since after all, uncertainty eventually went away?

Now of course nobody expects anything quite so stark, except perhaps limited to countries like Greece and Spain. But the point still stands: prolonged recessions can decrease the long-term trajectory of an economy. It's called hysteresis.

Will the feds be trying to block expansion of my business after I already have spent the money for expansion? Who knows? But Obama has already blocked a lot of such things (particularly, fossil fuel related industries and infrastructure) and is likely to continue that practice should he get reelected.

Frankly, you're letting your politics cloud sound judgement (bringing suspicions about future behaviour of one specific politician into the discussion is a sure sign of that). It is a pity that I cannot find the link right now, but a survey among small businesses around 2010-2011 clearly indicated that what they were most worried about was finding customers for their products and services.

Regulation can be troublesome, I give you that, but individual pieces of regulation are mostly confined to a very narrow segment of the economy, and the problem we're talking about here is obviously at a macro level.

Comment: Re:Regulation caused the Great Depression (Score 1) 397

by Nicolai Haehnle (#40893185) Attached to: Mathematician Predicts Wave of Violence In 2020

First of all, there wasn't that much stimulus happening in the first place. All those huge sounding numbers that the Fed throws around with various QE activities does almost exactly zero to stimulate the demand

It gave a tremendous amount of wealth to anyone who owed money. Bond and loan yields dropped as a result. There probably was a bit of inflation as well. That should have spurred collective demand in theory just due to the massive number of people who hold loans out there and suddenly had a lot less risk in their portfolio. In practice, I see it as confirmation of my assertion.

It didn't help those on the lower end of wealth spectrum as much though, like all those people whose mortgages were under water. Rate of savings matter a lot.

The argument that it's all about demand is just a transparent excuse to increase public spending.

That's where you're letting your politics cloud your judgement. Demand-side economists can almost as easily be used to justify tax cuts, and many demand-side economists indeed argue for income tax and tax roll cuts for lower-income brackets.

The subtle issue here is that tax cuts are only really effective when they affect low-wealth/income households, as those are the ones that are most likely to go out and spend the additional available income on real goods and services.

Similarly, many European businesses risk a lot if they make big investments now. They could get burned by some consequence of the Greek thing. That's just how it is. People are unwilling to buy lots of stuff, if they don't have confidence in the future.

But what kind of confidence are we talking about here? Mostly, we are talking about confidence in future income streams. If, as an employee, I worry about being laid off in the next few months, then naturally I am going to save more - if possible - to have some savings as buffer. Similarly, as an employer, if I worry about landing enough contracts over the next months, I am not going to employ more people. It's all about income streams.

Comment: Re:Regulation caused the Great Depression (Score 2) 397

by Nicolai Haehnle (#40884601) Attached to: Mathematician Predicts Wave of Violence In 2020

Of course, my assertion is. But why isn't all that stimulus that the US and the rest of the world burned, doing much? That's supposedly a huge spur to demand, but it's fallen pretty flat.

There are two things to keep in mind here. First of all, there wasn't that much stimulus happening in the first place. All those huge sounding numbers that the Fed throws around with various QE activities does almost exactly zero to stimulate the demand, and economists who focus on how the financial sector works have been able to predict that quite accurately.

Second, the Obama stimulus has in fact helped soften the recession according to most simulations, including those of the CBO. The stimulus simply wasn't very big compared to the overall size of the problem. (Yes, the problem was that huge.)

As for the whole uncertainty thing, look: Of course this is largely a chicken-and-egg problem. You are of course right that uncertainty leads to individuals spending less. But then this reduction in demand causes uncertainty in the first place. So the non-partisan question here is how to best break that cycle. It is obvious that if you inject more demand into the system, this eliminates many reasons for uncertainty for individual spending decisions.

Outside of neoclassical economic models, expectations follow reality more than the other way around.

Comment: Re:Defend flash trading? (Score 1) 377

by Nicolai Haehnle (#40858627) Attached to: Algorithmic Trading Glitch Costs Firm $440 Million

That's an interesting line of thought, though I would ask just how many cycles you would need to find the right price. The market may see some over- and undershoots in the valuation, but it seems like no more than a handful cycles would be needed. Then each cycle might require several "ticks" to work its way. In any case, even if the length of a tick were a minute, it should take much less than a day for the price to settle.

Comment: Re:High suicide rate in Japan (Score 1) 66

by Nicolai Haehnle (#40577723) Attached to: Social Networks, Suicide and Statistics

I suspect you are replying to people who have in mind a definition that "inflation = increase of the money supply". Needless to say that this is a ridiculous definition to start from in modern days, since the size of the money supply is not a thing anybody cares about as a primary indicator; the only reasonable definition for inflation is via the price level. But old habits die hard, and the nuts who want the world to work differently are very vocal in this small corner of economics. Don't sweat it ;-)

Comment: Re:I don't think so. (Score 1) 1128

The other side of that argument is that science is telling folks that no, you can't use more than we've got forever, and yes, what you do is impacting other people. And some folks want any excuse to say, "So what. I only live once, screw the next generation, I want it all. Now!"

Math is telling the government that no, you can't spend more money than you've got forever, and yes, what it does is impacting other people.

Actually, math is saying the opposite. Since the US federal government is monetarily sovereign (it is a currency issuer), math is saying that the US federal government is able to forever spend an arbitrary amount of US$. There are no limits. As long as there is somebody willing to sell a good or her services for US$, the US federal government can buy them.

Now obviously, running a too large deficit for too long will have inflationary effects. But how large is too large? There is no general rule for where the inflation-neutral point is. In fact, there are good arguments that the inflation-neutral point is a steady, long-run deficit to compensate for private sector net financial assets saving desires.

"The hands that help are better far than the lips that pray." -- Robert G. Ingersoll

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