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<DIV><FONT color=#000000 size=2>Chris,</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT><FONT
size=2> Thank you for your kind
remarks.</FONT></DIV>
<DIV><FONT size=2> I would say that what lies
behind speculation from the standpoint</FONT></DIV>
<DIV><FONT size=2>of Keynes (whose economics is still interesting despite his
apparent</FONT></DIV>
<DIV><FONT size=2>anti-Semitism) is not his "animal spirits" which
were directed more at</FONT></DIV>
<DIV><FONT size=2>why capitalists carry out real capital investments, that is,
build factories,</FONT></DIV>
<DIV><FONT size=2>etc., but the more general irrationality of herd behavior and
people trying</FONT></DIV>
<DIV><FONT size=2>to outguess each other. His most famous discussion along
these lines</FONT></DIV>
<DIV><FONT size=2>is his famous comparison of the stock market to a beauty
contest </FONT></DIV>
<DIV><FONT size=2> (General Theory, p. 156):</FONT></DIV>
<DIV><FONT size=2> "Or, to change the metaphor slightly,
professional investment may be</FONT></DIV>
<DIV><FONT size=2>likened to those newspaper competitions in which the
competitors have</FONT></DIV>
<DIV><FONT size=2>to pick out the six prettiest faces from a hundred
photographs, the prize</FONT></DIV>
<DIV><FONT size=2>being awarded to the competitor whose choice most nearly
corresponds</FONT></DIV>
<DIV><FONT size=2>to the average preferences of the of the competitors as a
whole; so that</FONT></DIV>
<DIV><FONT size=2>each competitor has to pick, not those faces which he himself
finds </FONT></DIV>
<DIV><FONT size=2>prettiest, but those which he thinks likeliest to catch the
fancy of the other</FONT></DIV>
<DIV><FONT size=2>competitors, all of whom are looking at the problem from the
same point of</FONT></DIV>
<DIV><FONT size=2>view. It is not a case of choosing those which, to the
best of one's judgment,</FONT></DIV>
<DIV><FONT size=2>are really the prettiest, nor even those which average opinion
genuinely thinks</FONT></DIV>
<DIV><FONT size=2>the prettiest. We have reached the third degree where we
devote our</FONT></DIV>
<DIV><FONT size=2>intelligences to anticipating what average opinion expects the
average opinion</FONT></DIV>
<DIV><FONT size=2>to be. And there are some, I believe, who practise the
fourth, fifth and higher</FONT></DIV>
<DIV><FONT size=2>degrees."</FONT></DIV>
<DIV><FONT size=2> BTW, I probably shouldn't
mention this either, :-), but I have a paper</FONT></DIV>
<DIV><FONT size=2>(with Roger Koppl) that deals with certain logical,
mathematical, computational,</FONT></DIV>
<DIV><FONT size=2>and philosophical problems arising from this argument.
It is also on my</FONT></DIV>
<DIV><FONT size=2>website (and currently under revision) under the title,
"Everything I Might Say</FONT></DIV>
<DIV><FONT size=2>Will Already Have Passed Through Your Mind."</FONT></DIV>
<DIV><FONT size=2></FONT><FONT color=#000000
size=2> I also note that Doug Henwood's
_Wall Street_ certainly discusses</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT><FONT size=2>in great detail many of the
individuals and firms involved in such speculative</FONT></DIV>
<DIV><FONT size=2>activities. Alan Greenspan accurately labeled it
"irrational exuberance."</FONT></DIV>
<DIV><FONT size=2>Barkley Rosser</FONT></DIV>
<DIV><FONT size=2><A
href="mailto:rosserjb@jmu.edu">rosserjb@jmu.edu</A></FONT></DIV>
<DIV><FONT size=2></FONT><FONT color=#000000 size=2><A
href="http://cob.jmu.edu/rosserjb">http://cob.jmu.edu/rosserjb</A></FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px">
<DIV><FONT face=Arial size=2><B>-----Original Message-----</B><BR><B>From:
</B>Chris Burford <<A
href="mailto:cburford@gn.apc.org">cburford@gn.apc.org</A>><BR><B>To:
</B><A href="mailto:lbo-talk@lists.panix.com">lbo-talk@lists.panix.com</A>
<<A
href="mailto:lbo-talk@lists.panix.com">lbo-talk@lists.panix.com</A>><BR><B>Date:
</B>Monday, February 19, 2001 2:13 AM<BR><B>Subject: </B>Re:
"Volatility as Social Flaring"<BR><BR></DIV></FONT>My conclusion
from this exchange was that Barkley's article is indeed to a large extent
tautologous, *and* that it is valuable, because expressing a common pattern
in mathematics is one of the routes to scientific advance. <BR><BR>I see
Barkley as a committed leftist, with significant social skills, as Doug has,
only different ones. This is an important quality in leftists, and by no
means universal. <BR><BR>While on the one hand Barkely is frequently
skittishly disarming and humorous, the article adopts the tone of an
authoritative academic article and demands respect. This is necessary to
establish a bridgehead in bourgeois dominated economics. (Compare the tone
of intellectual arrogance Marx and Engels often used in the ruthlessly
competitive intellectual climate of the 19th century.)<BR><BR>Keynes's
reservations about the use of formulas is interesting and correct, but
formulas are used in mainstream economics and Barkley is making a stand by
proposing a formula for the volatility of markets. <BR><BR>Barkley is also
progressing in his project of linking specifically non-linear modelling of
economic activity with the sort of critique that can make headway against
right wing reductionism.<BR><BR>The core of the article appears to be a
remarkable attempt to note that the narrowness of the peak in the
distribution curve of "asset price behaviour" relative to the
tails ("leptokurtosis"), does not follow a normal distribution of
random fluctuations in a continuous variable. The peaks are somehow steeper
than in a normal Gaussian curve. Further to that, the pattern is remarkably
similar to solar flares on the sun!<BR><BR>I would certainly have preferred
a much more discursive article but Barkley's article was not written for me
or the rest of us on this list as such: it was written to command respect
from mainstream economists, and from serious scientists looking at the
pattern of non-linear phenomena.<BR><BR>The question has to be discussed,
why should the peaks of price valuation be higher than expected on random
chance? Presumably the answer must be that there is some non-linear positive
feedback as there is in the cycle of solar flares. <BR><BR>Are these
Keynes's animal spirits? <BR><BR><BR>As for questioning such a proposition
by Barkley that is fine. One of Doug's skills as a moderator is that he is
neither excessively intolerant nor bland. He will prod. That does not mean
Barkely has no right to his opinions, or is obliged to reply. On the
contrary, if he posts an article here he should expect the support that
comes from basically other well intentioned people to probe it a little, be
devil's advocate, or provide alternative explanations. <BR><BR>It should
become quite normal and helpful to the reorganisation of the left, that
people can use e-mail lists such as this one, in this way.<BR><BR>Chris
Burford<BR><BR>London <BR><BR>PS I attach the abstract and the proper title,
as taken from Barkley's web-site<BR><BR><BR><FONT face="Arial, Helvetica"
size=4>
<B>VOLATILITY VIA SOCIAL
FLARING<BR><BR></B>
J. Barkley Rosser,
Jr.<BR>
Professor of
Economics<BR>
MSC
0204<BR>
James Madison
University<BR>
Harrisonburg, VA 22807
USA<BR>
Tel:
540-568-3212<BR>
Fax:
540-568-3010<BR>
E-mail:
rosserjb@jmu.edu<BR><BR><BR><BR>
December, 1999<BR><BR><BR><BR>ABSTRACT:<BR><BR> A
new explanation of kurtosis in asset price behavior is proposed involving
flare attractors. Such attractors depend on chaotic fundamentals
driving subsystems which trigger nonlinearly response functions each with a
switching mechanism representing the changing of agents from stabilizing to
destabilizing behavior. Heterogeneous agent types are shown by a set
of these response functions that are interlinked. With a larger number
of agent types system behavior resembles that of many financial
markets. Such a model is consistent with newer approaches relying upon
evolutionary learning mechanisms with heterogeneous agents as well as models
depending on fractal
characteristics.<BR><BR><BR></FONT></BLOCKQUOTE></BODY></HTML>