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The father of fractals: Benoit Mandelbrot's unusual multidisciplinary approach (economist.com)
34 points by iProject on Nov 2, 2012 | hide | past | web | favorite | 7 comments

It's strange how I can read an article in The Economist about Benoit Mandelbrot's "multidisiplinary" approach that makes almost no mention of his work on Economics.

To be fair, most of the stuff that isn't pretty pictures goes past me. However, one thing he did do was completely eliminate the validity of the (Nobel-prize winning) Black-Scholes model.

So we have E. Fama (another Nobel prize winner) with his efficient market hypothesis, stating that in a perfectly rational market, prices are random. The loophole for economic theorists, and the basis for Black-Scholes, was that price variances were thought to be predictable. Prices were random, but their fluctuations were generally not, and could be modeled as a Gaussian distribution. Mandelbrot suggested that this a soothing inaccuracy: prices were capable of varying much more wildly than that. He suggested that a Pareto distribution was more accurate.

So then we have one of the more fundamental problems in Economics: it is not a science. It's more of a cult for math geeks, in my opinion. If you can't prove that markets follow a Pareto distribution (implying an unpredictably-random price volatility), then why should economists listen to you? Black-Scholes gives them partial results, and that's better than nothing, right?


B. Mandelbrot: The Misbehavior of Markets: A Fractal View of Financial Turbulence http://www.amazon.com/Misbehavior-Markets-Fractal-Financial-...

Once upon a time a mathematician, let's call him M, applied for a position as a mathematics professor at a postgraduate institution. During the interview, M proposed an unusual salary arrangement to the department chair--let's call him D.

"I'm not asking for anything exorbitant. I ask only for $1 per year more than the salary of anyone else here, as a token of recognition that I am a better mathematician than anyone else in the department."

D said that he would think it over.

During their next meeting, M asked D what he thought of his proposal. D replied that after the deepest consideration, he had decided against it.

"Why?" M wanted to know.

"Because the reason for paying you that additional dollar isn't true," D replied.

Marcelo Bielsa, an extraordinary soccer manager, did the same thing when interviewed for Chile's manager position. He asked for $1 more than the salary of the best payed soccer player on the team. He made an excellent campaign for Chile on 2010 world cup.

I don't understand, sounds interesting but I'm missing a load of context. I think

Many of the scientists involved in the genesis of chaos theory were active in multiple disciplines, notably meteorology. It's a central theme in James Gleick's Chaos: Making a New Science[1]. It's a fascinating book, and would be a great read if you were tickled by the article.

[1] http://www.amazon.co.uk/Chaos-Making-Science-James-Gleick/dp...

Just published. The Fractalist: Memoirs of a Scientific Maverick. http://www.amazon.com/The-Fractalist-Memoir-Scientific-Maver...

The article is from 2003, can someone add this to the title? Mandelbrot died in 2010.

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