About 24 years ago, I read a book called "Normal Accidents", which laid out a thesis that accidents happen because people tend to misunderstand the situation within which they are operating, thus make fatal decisions. In the U.S., the present financial problems are due to the mortgage bubble, which came about from the creation of debit from lending for purchases which were not likely to be repaid while selling the mortgages to keep them off the bank's books. The resulting leverage coupled with the bursting of the speculative bubble then led to the implosion of the debit based financial system. Building a bubble based on leverage "creates" apparent wealth, which evaporates when the process is thrown into reverse as we are now experiencing.

The increased cost of fuel (whether due to Peak Oil or a short term mismatch between rapidly increasing demand and an the producers ability to increase supply) may have been the proverbial "straw that broke the camel's back" as the commuter's budget went bust. The systematic failure that resulted is the consequence of a lack of understanding by the economic theorists of very real resource limits on this finite Earth. The problem is that growth in resource consumption (particularly, fossil fuels) is not sustainable, no matter what the economists or politicians write or say.

E. Swanson

"Normal Accidents", which laid out a thesis that accidents happen because people tend to misunderstand the situation within which they are operating, thus make fatal decisions.



Great book.


The thesis is not so much that people misunderstand but rather that people do not operate well in complex environments; they are biased in a certain way. They "understand" and act in reflection of this bias and therefore mis-perceive the hazard and degree of risk exposure. The "accidents" are therefore not random events which cannot be foreseen but are "normal" artifacts of the manner in which the specific environment has been structured.


Three thousand people lost their lives on 9/11 with the result that the US has engaged in a costly war that has caused further great loss of life. Yet the automobile transport system results in an annual loss rate 10x the 9/11 losses and no one decides to wage war on Detroit. AGW may result in 100X the losses from 9/11 and still no one decides to wage war on Detroit.


We accept automobile casualties as a "normal" part of life, hence "normal" accidents. You are much safer on a commercial aircraft, or on an offshore MODU, than you are in your car but the public perceives the automobile as "safe" and the car and drilling rig as "risky" or dangerous.


Complex systems have multiple points of failure that interact in unpredictable and often undetectable ways, and are very difficult to diagnose and fix. We think of autos as under our control but in fact automobile operation is subject to a large range of variables over which we have little or no control.


With regards to the credit problem it is difficult to see how having several trillion of notional value (credit) supported by 1/60th of its true value (assets) could have any outcome other than the one we now experience. Having the people who bear responsibility for the problem attempt to resolve it is unlikely to work (unless you are a friend of Hank). The credit crunch is what occurs when you are no longer operating in a reality based economy. I would argue that the entire US is no longer anchored in reality and the problem is that reality will always assert itself.


The full title of the book is Normal Accidents: Living with High-Risk Technologies

Exactly this is why I don't care much for the popularity of the concept of black swan events.
They are intrinsic if you will in complex systems if we really understood complex systems we could prove statements such as in a sufficiently complex system that contains white swans black swans would also exist. These sorts of concepts are actually related to prime numbers for example the unanswered questions that deal with primes actually deal with complexity. Are numbers complex enough that the distribution of primes cannot be written in a closed form ?

I for example came up with a conjecture that between every prime and its square exists another prime. This density assertion seems true.

Turns out its closely related to Goldbach's conjecture.

http://en.wikipedia.org/wiki/Goldbach_conjecture

In fact if my statement is true then you can prove Golbach's conjecture and if Golbach is true you can prove my statement.

Damn :)

And worse the two statements are not equal but similar thus immensely tantalizing.
If I ever get thrown in prison I'll work on it again. The key is the density of primes needed for Globach's conjecture to be true is less than the requirement for mine thus primes are denser than than the prime and its square.

My point is that narly problems exist and proof of these are actually like what we consider a black swan they are a singular event you solve them once just like the proof of fermats last theorem.

This is complexity in all its beauty and power and we have not even left the integers to explore a more complex space. The complexity explodes almost immediately. Simply creating a pile of sand and predicting when it will suffer a big slide is impossible.

This is life its our universe its the way things really work.
j
Give this what do you do ?

You build in buffers and redundancy you do not push or stress these sorts of systems in fact you better treat them with gentleness and respect and go with the flow if you will. They can and will bite back.

Renewable concepts and all sorts of living in harmony concepts are really just recognition that we are really dealing with complex systems that we better not stress at our peril.

At some point we failed to communicate these truths to the average person certainly after we discovered the atomic bomb we lost our way. It could well have even been earlier with the discovery of the steam engine. We never figured out how to translate this complexity into a form that the common person could understand instead we reinvented the shaman and his secrets. Eventually we have create a world full of secrets a complex financial system full of acronyms understood by none and reliance on a finite energy source a reckless life style etc.

All of this in my opinion comes from our arrogance and inability to explain the unknown most people don't even realize we don't even fu%@!+n understand integers.

Simply creating a pile of sand and predicting when it will suffer a big slide is impossible.

On the one hand you dismiss Black Swan theory, then quote examples which agree with it.

On numbers, Godel showed that any sufficiently complex system contains propositions that are undecidable. Chaos theory shows that many natural phenomena, as well as artificial ones, are inherently unpredictable. We tend to dismiss the random part as being "abnormal", and prefer the linear parts. But the random part is normal, and we ignore it at our cost. This is what Black Swan theory alludes to.

Instead of acting all surprised about financial crashes, we should expect them to happen as an inherent and normal feature of the system. In order to create a truly stable system, it would have to be a lot simpler. Unfortunately, simpler systems do not provide the dopamine rush we crave.

A general theme throughout some cultures is to treat outliers as exceptions, instead of part of the norm. This assumption is fixed in the Judeo-Christian tradition, as well as others, where a creation of God is assumed to be harmonious and predictable. Other religions incorporate the idea of uncertainty, in the form of capricious gods who wreak destruction. The idea of the clockwork universe easily predates the atomic age. The idea of the chaotic universe has yet to percolate into popular understanding.



Reading Memmel I had the same confusion. He provides evidence for black swan events and then seeks to deny them. Do not understand his position.


I posit the existence of two parallel systems: 1) the human cognitive system anchored in language. This gives us the basis for logic and rationality which we try (to greater and lesser degrees) to ensure is self-referentially complete and without contradiction; 2) the enveloping reality in which we find ourselves embedded and about which we lack full understanding but which we attempt to "map" to conceptual constructs with varying degrees of success. The reality keeps "biting back" which reveals the shallowness of our own understanding and the true chaotic nature of that in which we are embedded.