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am_Unition · 3094 days ago · link · · parent · post: Larry Summers: Advanced economies are so sick we need a new way to think about them
As you're probably aware, many grad school physics and mathematics drop-outs go to Wall Street to model economics with differential equations in an effort to predict the future markets. If they're worth their salt, they've got a "hysteresis" term in their formulation, which is somewhat ironic, modeling what is potentially chaos; by its very nature unpredictable. I'm surprised to hear from the article that the inclusion of this term isn't the norm, at least for big banks. You could fashion inputs from an ongoing survey along the lines of "how do you perceive the market?", quantifying market optimism/pessimism and disagreements in perception. Love it when an economist puts things in terms familiar to physics.