soft sciences evolve. See Ormerod (2006) for network effects in "intellectuals and socialism"
and the power-law distribution in influence owing to the scale-free aspect of
the connections—and the consequential arbitrariness. Hayek seems to have been a
prisoner of Weber's old differentiation between Natur-Wissenschaften and Geistes
Wissenschaften—but thankfully not Popper.
Insularity of economists: Pieters and Baumgartner (2002). One good aspect of the insularity
of economists is that they can insult me all they want without any consequence:
it appears that only economists read other economists (so they can write papers for
other economists to read). For a more general case, see Wallerstein (1999). Note that
Braudel fought "economic history." It was history.
Economics as religion: Nelson (2001) and Keen (2001). For methodology, see Blaug
(1992). For high priests and lowly philosophers, see Boettke, Coyne, and Leeson
(2006). Note that the works of Gary Becker and the Platonists of the Chicago School
are all marred by the confirmation bias: Becker is quick to show you situations in
which people are moved by economic incentives, but does not show you cases (vastly
more numerous) in which people don't care about such materialistic incentives.
The smartest book I've seen in economics is Gave et al. (2005) since it transcends
the constructed categories in academic economic discourse (one of the authors is the
journalist Anatole Kaletsky).
General theory: This fact has not deterred "general theorists." One hotshot of the Platonifying
variety explained to me during a long plane ride from Geneva to New York
that the ideas of Kahneman and his colleagues must be rejected because they do not
NOTES 3 2 3
allow us to develop a general equilibrium theory, producing "time-inconsistent preferences."
For a minute I thought he was joking: he blamed the psychologists' ideas
and human incoherence for interfering with his ability to build his Platonic model.
Samuelson: For his optimization, see Samuelson (1983). Also Stiglitz (1994).
Plato's dogma on body symmetry: "Athenian Stranger to Cleinias: In that the right and
left hand are supposed to be by nature differently suited for our various uses of them;
whereas no difference is found in the use of the feet and the lower limbs; but in the
use of the hands we are, as it were, maimed by the folly of nurses and mothers; for although
our several limbs are by nature balanced, we create a difference in them by
bad habit," in Plato's Laws. See McManus (2002).
Drug companies: Other such firms, I was told, are run by commercial persons who tell researchers
where they find a "market need" and ask them to "invent" drugs and cures
accordingly—which accords with the methods of the dangerously misleading Wall
Street security analysts. They formulate projections as if they know what they are
going to find.
Models of the returns on innovations: Sornette and Zajdenweber (1999) and Silverberg
and Verspagen (2005).
Evolution on a short leash: Dennet (2003) and Stanovich and West (2000).
Montaigne: We don't get much from the biographies of a personal essayist; some information
in Frame (1965) and Zweig (1960).
Projectibility and the grue paradox: See Goodman (1955). See also an application (or perhaps
misapplication) in King and Zheng (2005).
Constructionism: See Berger and Luckmann (1966) and Hacking (1999).
Certification vs, true skills or knowledge: See Donhardt (2004). There is also a franchise
protection. Mathematics may not be so necessary a tool for economics, except to protect
the franchise of those economists who know math. In my father's days, the selection
process for the mandarins was made using their abilities in Latin (or Greek). So
the class of students groomed for the top was grounded in the classics and knew some
interesting subjects. They were also trained in Cicero's highly probabilistic view of
things—and selected on erudition, which carries small side effects. If anything it
allows you to handle fuzzy matters. My generation was selected according to mathematical
skills. You made it based on an engineering mentality; this produced mandarins
with mathematical, highly structured, logical minds, and, accordingly, they
will select their peers based on such criteria. So the papers in economics and social
science gravitated toward the highly mathematical and protected their franchise by
putting high mathematical barriers to entry. You could also smoke the general public
who is unable to put a check on you. Another effect of this franchise protection is that
it might have encouraged putting "at the top" those idiot-savant-like researchers who
lacked in erudition, hence were insular, parochial, and closed to other disciplines.
Freedom and determinism: a speculative idea in Penrose (1989) where only the quantum
effects (with the perceived indeterminacy there) can justify consciousness.
Projectibility: uniqueness assuming least squares or MAD.
Chaos theory and the backward/forward confusion: Laurent Firode's Happenstance,
a.k.a. Le battement d'ailes du papillon I The Beating of a Butterfly's Wings (2000).
Autism and perception of randomness: See Williams et al. (2002).
Forecasting and misforecasting errors in hedonic states: Wilson, Meyers, and Gilbert
(2001), Wilson, Gilbert, and Centerbar (2003), and Wilson et al. (2005). They call it
"emotional evanescence."
Forecasting and consciousness: See the idea of "aboutness" in Dennett (1995, 2003) and
Humphrey (1992). However, Gilbert (2006) believes that we are not the only animal
that forecasts—which is wrong as it turned out. Suddendorf (2006) and Dally, Emery,
and Clayton (2006) show that animals too forecast!
Russell's comment on Pascal's wager: Ayer (1988) reports this as a private communication.
3 2 4 NOTES
History: Carr (1961), Hexter (1979), and Gaddis (2002). But I have trouble with historians
throughout, because they often mistake the forward and the backward processes.
Mark Buchanan's Ubiquity and the quite confused discussion by Niall Ferguson
in Nature. Neither of them seem to realize the problem of calibration with power
laws. See also Ferguson, Why Did the Great War?, to gauge the extent of the forwardbackward
problems.
For the traditional nomological tendency, i.e., the attempt to go beyond cause
into a general theory, see Muqaddamah by Ibn Khaldoun. See also Hegel's Philosophy
of History.
Emotion and cognition: Zajonc (1980, 1984).
Catastrophe insurance: Froot (2001) claims that insurance for remote events is overpriced.
How he determined this remains unclear (perhaps by backfltting or bootstraps), but
reinsurance companies have not been making a penny selling "overpriced" insurance.
Postmodernists: Postmodernists do not seem to be aware of the differences between narrative
and prediction.
Luck and serendipity in medicine: Vale et al. (2005). In history, see Cooper (2004). See
also Ruffié (1977). More general, see Roberts (1989).
Affective forecasting: See Gilbert (1991), Gilbert et al. (1993), and Montier (2007).
CHAPTERS 14-17
This section will also serve another purpose. Whenever I talk about the Black Swan, people
tend to supply me with anecdotes. But these anecdotes are just corroborative: you
need to show that in the aggregate the world is dominated by Black Swan events. To me,
the rejection of nonscalable randomness is sufficient to establish the role and significance
of Black Swans.
Matthew effects: See Merton (1968, 1973a, 1988). Martial, in his Epigrams: "Semper
pauper eris, si pauper es, Aemiliane./Dantur opes nullis (nunc) nisi divitibus. " (Epigr.
V 81). See also Zuckerman (1997,1998).
Cumulative advantage and its consequences on social fairness: review in DiPrete et al.
(2006). See also Brookes-Gun and Duncan (1994), Broughton and Mills (1980),
Dannefer (2003), Donhardt (2004), Hannon (2003), and Huber (1998). For how it
may explain precocity, see Elman and O'Rand (2004).
Concentration and fairness in intellectual careers: Cole and Cole (1973), Cole (1970),
Conley (1999), Faia (1975), Seglen (1992), Redner (1998), Lotka (1926), Fox and
Kochanowski (2004), and Huber (2002).
Winner take all: Rosen (1981), Frank (1994), Frank and Cook (1995), and Attewell
(2001).
Arts: Bourdieu (1996), Taleb (2004e).
Wars: War is concentrated in an Extremistan manner: Lewis Fry Richardson noted last
century the uneveness in the distribution of casualties (Richardson [I960]).
Modern wars: Arkush and Allen (2006). In the study of the Maori, the pattern of fighting
with clubs was sustainable for many centuries—modern tools cause 20,000 to 50,000
deaths a year. We are simply not made for technical warfare. For an anecdotal and
causative account of the history of a war, see Ferguson (2006).
S&P 500: See Rosenzweig (2006).
The long tail: Anderson (2006).
Cognitive diversity: See Page (2007). For the effect of the Internet on schools, see Han et
al. (2006).
Cascades: See Schelling (1971,1978) and Watts (2002). For information cascades in economics,
see Bikhchandani, Hirshleifer, and Welch (1992) and Shiller (1995). See also
Surowiecki (2004).
Fairness: Some researchers, like Frank (1999), see arbitrary and random success by others
as no different from pollution, which necessitates the enactment of a tax. De Vany,
Taleb, and Spitznagel (2004) propose a market-based solution to the problem of alNOTES
3 2 5
location through the process of voluntary self-insurance and derivative products.
Shiller (2003) proposes cross-country insurance.
The mathematics of preferential attachment: This argument pitted Mandelbrot against
the cognitive scientist Herbert Simon, who formalized Zipf's ideas in a 1955 paper
(Simon [1955]), which then became known as the Zipf-Simon model. Hey, you need
to allow for people to fall from favor!
Concentration: Price (1970). Simon's "Zipf derivation," Simon (1955). More general bibliometrics,
see Price (1976) and Glanzel (2003).
Creative destruction revisited: See Schumpeter (1942).
Networks: Barabasi and Albert (1999), Albert and Barabasi (2000), Strogatz (2001,
2003), Callaway et al. (2000), Newman et al. (2000), Newman, Watts, and Strogatz
(2000), Newman (2001), Watts and Strogatz (1998), Watts (2002, 2003), and Amaral
et al. (2000). It supposedly started with Milgram (1967). See also Barbour and
Reinert (2000), Barthélémy and Amaral (1999). See Boots and Sasaki (1999) for infections.
For extensions, see Bhalla and Iyengar (1999). Resilence, Cohen et al.
(2000), Barabasi and Bonabeau (2003), Barabasi (2002), and Banavar et al. (2000).
Power laws and the Web, Adamic and Huberman (1999) and Adamic (1999). Statistics
of the Internet: Huberman (2001), Willinger et al. (2004), and Faloutsos, Faloutsos,
and Faloutsos (1999). For DNA, see Vogelstein et al. (2000).
Self-organized criticality: Bak (1996).
Pioneers of fat tails: For wealth, Pareto (1896), Yule (1925,1944). Less of a pioneer Zipf
(1932, 1949). For linguistics, see Mandelbrot (1952).
Pareto: See Bouvier (1999).
Endogenous vs. exogenous: Sornette et al. (2004).
Sperber's work: Sperber (1996a, 1996b, 1997).
Regression: If you hear the phrase least square regression, you should be suspicious about
the claims being made. As it assumes that your errors wash out rather rapidly, it underestimates
the total possible error, and thus overestimates what knowledge one can
derive from the data.
The notion of central limit: very misunderstood: it takes a long time to reach the central
limit—so as we do not live in the asymptote, we've got problems. All various random
variables (as we started in the example of Chapter 16 with a +1 or - 1 , which is called
a Bernouilli draw) under summation (we did sum up the wins of the 40 tosses) become
Gaussian. Summation is key here, since we are considering the results of adding
up the 40 steps, which is where the Gaussian, under the first and second central assumptions
becomes what is called a "distribution." (A distribution tells you how you
are likely to have your outcomes spread out, or distributed.) However, they may get
there at different speeds. This is called the central limit theorem: if you add random
variables coming from these individual tame jumps, it will lead to the Gaussian.
Where does the central limit not work? If you do not have these central assumptions,
but have jumps of random size instead, then we would not get the Gaussian.
Furthermore, we sometimes converge very slowly to the Gaussian. For preasymptotics
and scalability, Mandelbrot and Taleb (2007a), Bouchaud and Potters (2003). For
the problem of working outside asymptotes, Taleb (2007).
Aureas mediocritas: historical perspective, in Naya and Pouey-Mounou (2005) aptly
called éloge de la médiocrité.
Reification (hypostatization): Lukacz, in Bewes (2002).
Catastrophes: Posner (2004).
Concentration and modem economic life: Zajdenweber (2000).
Choices of society structure and compressed outcomes: The classical paper is Rawls
(1971), though Frohlich, Oppenheimer, and Eavy (1987a, 1987b), as well as Lissowski,
Tyszka, and Okrasa (1991), contradict the notion of the desirability of Rawl's
veil (though by experiment). People prefer maximum average income subjected to a
floor constraint on some form of equality for the poor, inequality for the rich type of
environment.
3 2 6 NOTES
Gaussian contagion: Quételet in Stigler (1986). Francis Galton (as quoted in Ian Hacking's
The Taming of Chance): "I know of scarcely anything so apt to impress the
imagination as the wonderful form of cosmic order expressed by 'the law of error.' "
"Finite variance" nonsense: Associated with CUT is an assumption called "finite variance"
that is rather technical: none of these building-block steps can take an infinite
value if you square them or multiply them by themselves. They need to be bounded
at some number. We simplified here by making them all one single step, or finite standard
deviation. But the problem is that some fractal payoffs may have finite variance,
