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Economic Models Ignore Dependency and Irrationality - Is Agent Based Computing the Answer?

Summary

Stock price ticker - what next?

There is a nice article in the New Scientist Magazine (30th October 2010) by Philip Ball that looks at economic modelling.

It starts out by looking at the popular cause of the current economic crisis, the bankers and the American sub-prime mortgage market but points out the error in simply blaming the bankers , the opaque financial mechanisms and inducements to sell:

it ignores the complexities of a system that led the initially small perturbation of the "sub-prime" mortgage crisis to morph into systemic collapse. Moreover, concentrating on the specific causes of that one event fixates on the past at the expense of the future. When the next crisis comes, the disturbance will probably ripple out from another quarter of the economy, taking us completely unawares

It then asks if there is a better way in which we could prepare ourselves

Instead of making unrealistically simplistic assumptions about human behaviour and the properties of markets, we can harness the number-crunching power of modern computing, coupled with our emerging understanding of the physics of complex systems, to rebuild economic theory from the bottom up. Extending that approach to the social sciences more generally could help us develop forecasting tools to assess a whole range of problems threatening human society

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System of Systems (SOS) is An Arrangement Not a Type

Summary

A System of Systems is defined by a system boundary that includes several systems and which conforms to the properties and behaviour of the type 'system'

There are a lot of references to 'system of systems' or 'SoS' and a lot of merchants riding on the back of inappropriate use of this term (so in this sense SoS ought to be Snake Oil Supplier!). Why does this matter and what are the impacts of sloppy use of the term?

What Type of Thing is a System of Systems?

As far as anyone has been able to establish a System of Systems is itself a 'System'. In other words it is of type 'System'. It is not of type 'System of Systems'. This is important because it means that general statements, properties and behaviours of a system are true for System of Systems. It also means that you shouldn't force or represent a binary choice between system and system of systems because you're still talking about 'system'. There are extra considerations for a system of systems but these are simply repetitions of the general approach for 'system' for the boundary of the system-of-interest which in this case includes several systems.

Even if the system so formed is accidental what we mean is that it had no designed man-made purpose (it is not a 'man-made system'). This doesn't mean it isn't a system. The characteristics of any system are that it has emergent behaviour and is stable (at least in human timescales) all of which need no predefined purpose or designation of control authority.

If a System of Systems isn't a System we'd have many problems. We'd need to identify how it differs from a system and we couldn't use methods that represent systems, such as architecture frameworks, to represent a system of systems as it is likely that the necessary constructs wouldn't exist.

System of Systems is an Arrangement

A System of Systems is an arrangement of systems to form a system. It is defined by the system boundary that encompasses these systems to describe this system-of-interest. All too often it is the fact that we didn't identify this boundary or have any body being responsible for this system that causes the problems - we probably have lower level authority but no one has the responsibility for the emergent behaviour and integration of this arrangement of systems. That's when the trouble begins.

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Visualisation of Relationships

Summary

This is a recurring theme. Systems-thinking, systems engineering and architecture description are primarily concerned with identifying and managing the important relationships with other things in the world. They are relationship-centric rather than object-centric.

It is often hard for folks used to using flat 2D diagrams produced in PowerPoint or Visio to appreciate the potential power behind relationships. Flat diagrams don't make it easy to explore nearby related things and because they're limited in terms of the parameters you can apply, for example weightings to indicate proximity or importance, you often need many versions or different cut-sets of the bigger one.

Having a means to store objects and relationships and represent them allows you to explore beyond the immediate vicinity to assess impacts and dependencies. There is a very nice example on TED.com of the use of relationships by ecologist Eric Berlow which is helped by the ability to visualise them in a nice way. This could be achieved using a architecture description repository although the visualisation is probably not as good. There are bound also to be other tools that are good at representing and filtering relationships - possibly harking back to the thoughts for visualisations of information sources using Resource Description Format (RDF). With Linked Data gaining ground you need only to be able to see that relationships or dependencies exist but to be able to see what affect the strength of that relationship has. The Mk1 Human Being is highly adapted to visual input and stimulus so it is perhaps not surprising that being able to see and manipulate visually is a powerful tool in identifying context and assessing impact.


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