Modular-Finance & Combinatory Play:
"There isn't a single story. The way we understand economics and economies is by learning from lots of sources and thinking about them in a lot of different ways."
"you can't understand how the financial crisis came about without understanding the politics of the relationship between the financial sector and government and the anthropology of the cultures of these organizations, or indeed without appreciating the history of bubbles and financial crisis."
Hat tip ~ John Kay, British Economist, Economics in the Real World
Modularity, Evolution & Emergence:
The Design Principle and Behavior of Complex Adaptive Systems
The Adaptive Market Hypothesis
The Adaptive Market Hypothesis is based on the insight that investors and financial markets behave more like biology than physics, comprising a population of living organisms competing to survive, not a collection of inanimate objects subject to immutable laws of motion. This simple truth has far-reaching implications. For one thing, it implies that the principles of evolution - competition, innovation, reproduction, and adaptation - are more useful for understanding yhe inner workings of the financial industry than the physics-like principles of rational economic analysis. ...
Math is Overated
For the past 50 years, academic finance has been dominated by highly mathematical models and methods that derived from phyics. These sophisticated quanitative techniques spawned a wave of financial innovation, and triggered an evolutionary change within the world of finance. However, Lo argues that despite the advantages these advanced quantitative techniques provided, this mass "mathematization" of finance has significant flaws.
Finance isn't physics, despite the similarities between the physics of heat conduction and the mathematics of derivative securities, for example. The difference is human behavior and the role of evolution in its development....The financial crisis showed us that investors, portfolio managers, and regulators do have feelings, even if those feelings were mostly disappointment and regret during the last few years. Financial economics is much harder than physics.
"The good news is that, contrary to common perception, math for its own sake does not get you far in the economics profession. What's valued is "smarts": the ability to shed new light on an old topic, make an intractable problem soluble, or devise an ingenious new empirical approach to a substantive question. In fact, the emphasis on mathematical methods in economics is long past its peak."
Trading Economics: a new theoretical system
Hat tip ~ Wang Zhenying
Crisis destroy, but crisis also create.
The outbreak of each crisis gives rise to new economic theories. Marx's theory of Surplus Value was created amist frequent economic crisis in the late 19th century and Keynes's revolutionary theory was put forward during the Great Depression in the 1930's. Today, with a worldwide financial tsunami only now receding, people are expecting a new economic theory in response to the failure of the pre-crisis mainstream.
"What the human being is best at doing is interpreting all new information so that prior conclusions remain intact."
~ Warren Buffett
Connecting The Dots:
As Maria Popova puts it, "In order for us to truly create and contribute to the world, we have to be able to connect countless dots, to cross-pollinate ideas from a wealth of disciplines, to combine and recombine these pieces and build new castles." This understanding of creativity as connection and recombination makes the blank piece of paper not only unhelpful but actually counterproductive. So, ditch it.
In Design Thinking & Systems Thinking, We must start with ....What IS....and work from there...