(ii) Are complex economic models the answer?: Aswath Damodaran offers a counterpoint to a recent WSJ piece on the need for more complex economic models.
To those who believe that complex models with more variables are the answer to uncertainty, my response is a paper by Ed Lorenz in 1972, entitled Predictability: Does the flap of a butterfly's wing in Brazil set off a tornado in Texas?, credited with creating an entire discipline: chaos theory. In the paper, Lorenz noted that very small changes in the initial conditions of a complex models created very large effects on the final forecasted values. Lorenz, a meteorologist, came to this recognition by accident. One day in 1961, Lorenz inputted a number into a weather prediction model; he entered 0.506 as the input instead of 0.506127, expecting little or no change in the output from the model. What he found instead was a dramatic shift in the output, giving rise to a Eureka moment and the butterfly effect.
(iii) The sayings of Mikhail Zhvanetsky: Some precious one-liners. Not all are new, and some may have priority issues. But fun anyway. Here are some:
- I drive too fast to worry about cholesterol.
- The highest degree of embarrassment? Exchanged glances in a keyhole.
- Of two evils, I choose the one I haven’t tried before.
- Good always wins over evil. Hence, the winner is always good.