"Volatility as Social Flaring"

[J. Barkley Rosser, Jr.]

      Doug seems to be laying low on this one, but
I think I will follow up with a few more remarks, 
especially as I have had some sleep and am in a
better mood today.  I am not, however, going to get
into a general discussion of math in econ other than
to say that you really cannot seriously do econ today
without math.  This does not mean that all math is good
in econ.  I support the protests by the post-autistic
group in France against the uses of math to justify the
establishment that are indeed endemic in much of
economics today.
     The paper uses a mathematical technique ("flare
attractors") that has not been used in economics before.
I suspect that it may have other uses than the one I put it
to, which has been received well by Otto Rossler, the 
discoverer of flare attractors.  I have already described
how one can use it to describe in a clear way certain kinds
of financial market dynamics.  I also note that the paper is
under revision and that the revised version (not up on my
website yet) shows indeed that this technique generates
levels of kurtosis (fat tails, or extreme events) that correspond
very closely to those found in actual data on financial markets.
      Although the paper is being presented at the Atlanta Fed, it
is actually being presented to the Society for Nonlinear Dynamics
and Econometrics, which is meeting there because the organizer,
Jerry Dwyer, works in the Research Dept. there.
      Finally, just for Doug, I would note that if one wishes to 
establish that a particular pattern of market behavior does not
correspond to "reasonable market valuation," then one must
resort to a mathematical model.  One can say "I know it is, look
at it," but this will not convince someone who does not agree
with you.  More is needed, much more, and it will inevitably
involve a theoretical math model which will then be combined
with econometric torturing of the data series in question, probably
some pretty nasty econometric torturing at that.
       Finally, the reason that I made my ironic remark was precisely
that Doug is such an admirer of raw data in numerical form.  If he
said that none of it mattered, that what matters is the essence
of exploitative relations, or something along these lines, or the
nature of economic institutions to be understood purely verbally,
then I would have more understanding of, appreciation for, and
sympathy with his professed general hostility to the use of math
in general in economics.  Even if one does not like mathematical
economics theory, if one wants to seriously make statements
about those numerical tables, one will need to resort at least
to econometrics.
      As to whether I have done anything socially worthwhile using 
econometrics?  Well, my coauthored papers
on income inequality and the underground economy in 
transition economies (see website for several of those) 
directly attack Washington Consensus policies by the IMF et al.
We, the authors of those papers, are even beginning to attract'
some attention from those in policy circles to our arguments 
that social safety nets should be maintained in transition 
economies.  Enough for now.  Have a nice rest of the weekend
everybody.
Barkley Rosser
rosserjb at jmu.edu
http://cob.jmu.edu/rosserjb