Patterns in the Dark
Understanding Risk and Financial Crisis with Complexity Theory
Wiley Investment Series
1. Edition May 1999
XVIII, 222 Pages, Hardcover
Wiley & Sons Ltd
Short Description
Complexity theory tells us that processes with a large number of seemingly independent agents-such as the free markets-can spontaneously organize themselves into a coherent system. In this groundbreaking book, Edgar Peters provides a thoughtful and coherent explanation of complexity theory in relation to the world of finance. Patterns in the Dark shows how complexity and randomness are particularly applicable and necessary in the financial markets by providing real-world examples from within finance and other disciplines.
Patterns in the Dark is that rare book that offers an entirely new perspective on an issue of ongoing concern to investors: the unpredictability of financial markets. In this groundbreaking work, leading investment strategist and authority on chaos theory, Edgar Peters makes accessible ways of understanding market behavior that-until now-were known only to specialists.
Patterns in the Dark draws on a broad range of human knowledge and experience to clarify the behavior of a system that now operates on a global, 24-hour, and thoroughly interconnected basis. Peters illuminates the complex operation of the marketplace by including keen observations drawn from science, mathematics, and artistic creation as well as economics. His models include the social visions of the Austrian economists, Darwinian ideas of evolution, the laws of physics, and the creative risks of the artist. His meditations on financial markets weigh the effects of limitations vs. rules, risks vs. uncertainty, and order vs. chaos.
As a guide to a world marketplace that has become increasingly complex and uncertain, Patterns in the Dark offers the investor a rich source of insight, illumination, and wisdom.
UNCERTAINTY, COMPLEXITY, AND SPONTANEOUS ORGANIZATION.
Imposing Order: Conspiracies and the Mathematics of Ignorance.
Uncertainty, Vagueness, and Ambiguity: The Need for Information.
Complexity and Time: The Dynamics of Uncertainty.
FREE MARKETS AND THE NEED FOR UNCERTAINTY.
Subjectivism: "The Economics of Time and Ignorance."
Diversity and Knowledge.
Crisis and Competition: Creative Destruction in Free Markets.
Economic Evolution: Change in Real Time.
Creativity: Uncertainty, Innovation, and Entrepreneurs.
Rules and Law: Limits in Complexity.
Degrees of Order: Balancing Rules, Freedom, and Uncertainty.
The Need for Uncertainty.
References.
Index.
Edgar E. Peters's latest book, Patterns in the Dark: Understanding Risk and Financial Crisis with Complexity Theory is not merely an autobiographical indulgence. The bulk of the book is Peters's lucent analysis expounding on the need for uncertainty. Whether he uses the example of genetic algorithms to show how randomness can lead a process to a goal even when the ultimate path is unknown, or if he simply shows how David Bowie's creation of Ziggie Stardust illustrates the integration of two seemingly contrary elements in the creative process (with a nod toward uncertainty as a requirement for stability), Peters's always seems to provide compelling insight into how global structure and local randomness interact.
Ultimately, the book's implications for "global structure" policymakers are more clear than any prescriptions that might be handed down to individual investors acting in an environment of local randomness. However, the discussions regarding various process models and their implications for economic activity are worth the price of admission alone. Interested investors ought to check it out.--("Fool On The Hill - An Investment Opinion" by Alex Schay - June 1999)