A Nearly Perfect System After Paul Krugman’s essay, “How Did Economists Get It So Wrong?”Beauty might be mistaken for truth on a Grecian Urn but for beauty to fool us in the guise of elegant mathematics takes another kind of faith. I built an equation to predict the outcome of our love. I calculated Not Happy and I sent it to him. He added a variable for the suspension of disbelief. There are limitations to human rationality (that often lead to bubbles and busts), THERE ARE IDIOTS. Look around. There are noise traders, Not Rational, not motivated by a compulsive need to explain everything in equations. Some truths can be revealed with mathematics and others just need to be lived -- these are truths you know are true just lying on the couch smoking seedy marijuana. But even when you step out into the world, inductive reasoning can fail. The black swan, red billed, s-necked, fat-tailed with very large kurtosis did not exist until 1790. An Englishman could lie on his couch and know that all swans were white but real life is not normal, does not follow the norm- al distribution, cannot be proven to be significant in a universe that considers the known unknown but ignores the unknown unknowns that will sometimes prove themselves to be a water bird living somewhere in southwest Australia. If irrational exuberance is what we feel in a new relationship when the cardinality of a set of two is more than | love |, then that is the value of the suspension of disbelief. But when zero interest isn’t low enough to stimulate something flagging, does not bring us back to where we need to be, is there a negative rate -- can you go negative into the future or is that only an abstraction for those in love with reason. If we are rational there is no need to create a variable for hope, but sometimes our impulses run through us like water and I know now that falling water creates bubbles; When I stood beside the waterfall I slipped on wet rock and to avoid falling, I stepped towards white stonebut it was really only froth andI landed hard in the cold stream. Too much liquidity is said to create bubbles, a sort of irrational exuberance that leads the idiots like lemmings but also leaves the economists, after the bust, the burst, the break up, building equations to incorporate our own dysfunction. by Alexis Fedorjaczenko, 2009 Return to blog