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coberst
04-19-2010, 09:43 AM
Would IT have happened had Greenspan studied SGCS?

Allan Greenspan is the former director of the Federal Reserve; “IT” is the giant financial boondoggle that almost sent the globe into another Great Depression.

Greenspan admitted that the “model” he was trusting was mistaken. The model in which he had placed his trust is the utilitarian model also known as the consequentialist normative theory that, according to Fieser, means that “correct moral conduct is determined solely by a cost-benefit analysis of an action’s consequences”. Fieser, J. Ethics: Consequentialist Theories--Internet Encyclopedia of Philosophy

SGCS (Second Generation Cognitive Science) informs us that the “utilitarian person, for whom rationality is economic rationality—the maximization of utility—does not exist. Real human beings are not, for the most part, in conscious control of—or even consciously aware of—their reasoning.”

In the 1970s a new body of empirical research began to introduce findings that questioned the traditional Anglo-American cognitive paradigm of AI (Artificial Intelligence), i.e. symbol manipulation.

This research indicates that the neurological structures associated with sensorimotor activity are mapped directly to the higher cortical brain structures to form the foundation for subjective conceptualization in the human brain. In other words, our abstract ideas are constructed with copies of sensorimotor neurological structures as a foundation. “It is the rule of thumb among cognitive scientists that unconscious thought is 95 percent of all thought—and that may be a serious underestimate.”

Categorization, the first level of abstraction from “Reality” is our first level of conceptualization and thus of knowing. Seeing is a process that includes categorization, we see something as an interaction between the seer and what is seen. “Seeing typically involves categorization.”

Our categories are what we consider to be real in the world: tree, rock, animal…Our concepts are what we use to structure our reasoning about these categories. Concepts are neural structures that are the fundamental means by which we reason about categories.

Human categories, the stuff of experience, are reasoned about in many different ways. These differing ways of reasoning, these different conceptualizations, are called prototypes and represent the second level of conceptualization

Typical-case prototype conceptualization modes are “used in drawing inferences about category members in the absence of any special contextual information. Ideal-case prototypes allow us to evaluate category members relative to some conceptual standard…Social stereotypes are used to make snap judgments…Salient exemplars (well-known examples) are used for making probability judgments…Reasoning with prototypes is, indeed, so common that it is inconceivable that we could function for long without them.”

When we conceptualize categories in this fashion we often envision them using spatial metaphors. Spatial relation metaphors form the heart of our ability to perceive, conceive, and to move about in space. We unconsciously form spatial relation contexts for entities: ‘in’, ‘on’, ‘about’, ‘across from’ some other entity are common relationships that make it possible for us to function in our normal manner.

When we perceive a black cat and do not wish to cross its path our imagination conceives container shapes such that we do not penetrate the container space occupied by the cat at some time in its journey. We function in space and the container schema is a normal means we have for reasoning about action in space. Such imaginings are not conscious but most of our perception and conception is an automatic unconscious force for functioning in the world.

Our manner of using language to explain experience provides us with an insight into our cognitive structuring process. Perceptual cues are mapped onto cognitive spaces wherein a representation of the experience is structured onto our spatial-relation contour. There is no direct connection between perception and language.

The claim of cognitive science is “that the very properties of concepts are created as a result of the way the brain and the body are structured and the way they function in interpersonal relations and in the physical world.”

Quotes from Philosophy in the Flesh by Lakoff and Johnson

billl
04-20-2010, 03:45 AM
I am not an economist, not even close--but I think that it might not be relevant to view Bernanke as a judge of "moral decision-making" amongst the 'players' and other forces on the U.S. economy. At least, I think that such errors would not account for the totality of the problem. I think that there has been plenty of immorality going on in business and banking circles for some time, and that the system had to some degree accepted that, all along.

I was rather impressed with Nassim Taleb's take on the roots of the crisis. Here is a quote from the introduction to a nice essay he wrote at edge.org


In the following Edge original essay, Taleb continues his examination of Black Swans, the highly improbable and unpredictable events that have massive impact. He claims that those who are putting society at risk are "no true statisticians", merely people using statistics either without understanding them, or in a self-serving manner. "The current subprime crisis did wonders to help me drill my point about the limits of statistically driven claims," he says.

Here's the whole essay from Sept. 2008:
http://www.edge.org/3rd_culture/taleb08/taleb08_index.html

It is telling that Taleb includes a condemnation of "self-serving" institutions trying to spin statistics, but I think there is fair reason to believe that individuals might be completely scrupulous (or believe that they are...), yet nevertheless fall victim to having too much conviction in patterns and systems that have had explanatory power that might yield to a sort of dogmatism, or an exaggerated sense of control or sureness.


And here's a link to his heralded essay from 2004, about unexpected events in statistics, where he introduces the idea of "black swan":
http://www.edge.org/3rd_culture/taleb04/taleb_index.html

For many years, the black swan served as a metaphor for the impossible, or the contradictory, amongst the British elite. Then, one day, actual black swans were found to exist in Australia. In economics, our sureness in models, trends and behaviors can lead to disastrous surprises. Especially in complex fields, such as economics (and, I dare say, cognitive sciences) it is wise to not allow dogmatisms to "inform" us with 100% automation and acceptance, and we should take into account the unpredictable vagaries of systems that are capable of producing greater variety than our models and calculations could hope to encompass and duplicate entirely (outside of the opportunity for an eternity of evaluation).

coberst
04-20-2010, 09:00 AM
Statistics did not create IT. Lack of regulation created IT.

billl
04-20-2010, 10:10 AM
Yes, I certainly think that there was (is) a lack of regulation. But why was there a failure in regulation? The models that Greenspan used, and the models used by the important players on Wall Street failed. In the case of some individuals, it was almost certainly a conscious, cynical, and immoral manipulation and misrepresentation of the numbers. In other cases, it may very well have been a mistaken faith that certain trends were understood/predictable.

coberst
04-20-2010, 02:33 PM
Yes, I certainly think that there was (is) a lack of regulation. But why was there a failure in regulation? The models that Greenspan used, and the models used by the important players on Wall Street failed. In the case of some individuals, it was almost certainly a conscious, cynical, and immoral manipulation and misrepresentation of the numbers. In other cases, it may very well have been a mistaken faith that certain trends were understood/predictable.


The failure to regulate was that some thought that a self-regulated market could work, some made a lot of money from a free market, Corporate America pays for the campaigns of the politicians, and the American people lacks the intellectual sophistication to comprehend our problems much less to solve them.