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Category: Economic Theory

Gibbs Free Energy, Belief Propagation, and Markov Random Fields

Gibbs Free Energy, Belief Propagation, and Markov Random Fields

Correspondence Between Free Energy, Belief Propagation, and Markov Random Field Models As a slight digression from previous posts – re-reading the paper by Yedidia et al. on this morning on Understanding Belief Propagation and its Generalizations – which explains the close connection between Belief Propagation (BP) methods and the Bethe approximation (a more generalized version of the simple bistate Ising model that I’ve been using) in statistical thermodynamics. The important point that Yedidia et al. make is that their work…

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"What is X?" – Modeling the Meltdown

"What is X?" – Modeling the Meltdown

“What is X?” – Modeling the 2008-2009 Financial Systems Meltdown We’re about to start a detailed walkthrough of applying a “simple” statistical thermodynamic model to the Wall Street players in the 2007-2009 timeframe. The two kinds of information that I’ll be joining together for this will be a description of Wall Street dynamics, based largely on Chasing Goldman Sachs (see previous blogposts for link), and the two-state Ising thermodynamic model that I’ve been presenting over the past several posts. The…

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Modeling Nonlinear Phenomena

Modeling Nonlinear Phenomena

Modeling Nonlinear Phenomena – What is “X”? Many of us grew up hating word problems in algebra. (Some of us found them interesting, sometimes easy, and sometimes fun. We were the minority.) For most of us, even if we understood the mathematical formulas, there was a big “gap” in our understanding and intuition when it came to applying the formulas to some real-world situation. In the problem, we’d be given a set of statements, and then told to find “something.”…

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"The Origin of Wealth" – Revisited

"The Origin of Wealth" – Revisited

The Origin of Wealth – and Phase Transitions in Complex, Nonlinear Systems Once again, after a nearly two-year hiatus (off by only a week from my first posting on this in May of 2010), I’m getting back to one of my great passions in life – emergent behavior in complex, adaptive systems. And I’m once again starting a discussion/blog-theme referencing Eric Beinhocker’s work, The Origin of Wealth. Since this book was originally published (in 2006), we’ve seen an ongoing series…

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"Origins of Wealth" – A (Multi-Part) Critical Review

"Origins of Wealth" – A (Multi-Part) Critical Review

Over the last few months, questions of not only wealth and finances, but the underpinnings of our entire financial structure, have become paramount in many of our minds. We — that usually means you and me — and right now means the world collectively — have largely misunderstood the world’s financial structure over recent years. (Those who HAVE accurately understood are not only more secure, but substantially richer by now.) Most of us are current on “what went wrong.” Most…

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