Probability versus Ontology in Market Predictions

[nicomachus]

In a lecture by Elie Ayache titled, "The Blank Swan: The End of Probability," Ayache uses Meillassoux's notion of absolute contingency to ground an understanding of the market. Contemporary financial engineers are fundamentally misguided because they neglect ontology.

www.amazon.com/Blank-Swan-End-Probability/dp/0470725222/ref=sr_1_1?ie=UTF8&qid=1293634650&sr=8-1


To hear the lecture:

www.7citymedia.co.uk/Mirrored/CQF/Extra_Lectures/1003487/Recordings/html/CQF_Extra_HB_UK_The_Blank_Swan_Part01.html


Instead of considering that a price is the result of probabilistically derived expectation, he reverses the issues and investigates these artificial constructs as 'probabilities' and 'expectations' as secondary, derived, fictitious concepts that we bring about to explain prices, decisions, and other things.

[vl]

"In the context of knowledge sharing, I use the term ontology to mean a specification of a conceptualization. That is, an ontology is a description (like a formal specification of a program) of the concepts and relationships that can exist for an agent or a community of agents. This definition is consistent with the usage of ontology as set-of-concept-definitions, but more general. And it is certainly a different sense of the word than its use in philosophy."

Gobbledygook.

Probability occurs when trends have a notable consistency that can be forecasted with some degree of Risk and Reality. We aren't in a probability reliability circumstance, we're 100 miles off the beaten path and cannot see that last Stop Sign we passed with the drunk driving (Dubya). We don't need ontology either. Common Sense will do nicely.

[nicomachus]

Positing probability or risk as reality is an ontological claim. Either way you turn, you can't avoid it.

One of the most serious economic repercussions of the loss of ontology is that we talk about money without knowing what money is. Money, from its origin, is a medium for transaction of goods. As such, the notion of being able to treat money itself as a commodity capable of trading makes no sense (its too redundant, basically).

Had this been realized some time ago, the economic crises of the past four years would not have happened.