Inadequate Equilibria

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1. niyikizaJun 2023
   EY wrote a good book about that very topic: "Inadequate Equilibria -- Where and How Civilizations Get Stuck" https://equilibriabook.com/
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2. yborisNov 2022
   An interesting book on this topic: https://equilibriabook.com/ - Inadequate Equilibria by Eliezer Yudkowsky.

   Societies (and smaller groups like companies too) could get stuck in a shitty "equilibria" - where even a non-expert can spot the inefficiencies, suggest obvious improvements, and yet not have the change occur. A great analysis of the unfortunate gridlock we find ourselves in sometimes.

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3. yewenjieMay 2021
   There is a name for this kind of phenomenon - Inadequate Equilibria - why civilizational scale failures can still occur even if every actor is doing things as efficiently as possible.

   Some of you might want to read the excellent book that introduced the concept - https://equilibriabook.com/

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4. kqrFeb 2021
   I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses, and practitioners rarely suffer from the kind of personal survival pressure that otherwise tends to filter out for people who are right.

   Not to mention that the entire economy is such a complex system, and my experience with complex systems is that we can't predict them, we like to come up with causal explanations for observed events, and we're almost always wrong on closer scrutiny.

   With all that in mind, I have started my economics journey not on the macro picture, but on the details. Book recommendations include:

   - The Kelly capital investment criterion: a collection of historic peer-reviewed papers about what it says on the tin: how to allocate resources to risky ventures (read: how to size bets.)

   - Red-Blooded Risk: a wandering tale about quantitative risk management and how it entered the world of finance in the seventies--eighties. As always with Aaron Brown, it contains lots of information on economic matters that aren't directly related to the main subject.

   - The Economic Function of Futures Markets: a correct, for once, exposition on how futures markets are not about locking in prices (any regular contract can do that) or hedging (the people who supposedly would hedge don't) but about creating an implicit loan market for commodities, among other things.

   - The Poker Face of Wall Street: a wandering tale on the similarities between betting, speculation in financial instruments, and insurance, among other things.

   - The (Mis)Behaviour of Markets: Benoit Mandelbrot summarises some of his research into modeling markets with multifractal geometric ideas.

   - Fortune's Formula: a more pop-sci friendly version of the Kelly criterion paper collection.

   - Regression Modeling with Financial and Actuarial Applications: basic techniques used everywhere for statistical modeling of things.

   - Moneyball: finding not the best, but the most undervalued through quantitative reasoning.

   - Inadequate Equilibria: a framework for thinking about when economic incentives align with a desired outcome and when they don't.

   I have also started a fairly advanced prediction market at work to get a better sense for how such things work, and I'm the guy who you either love or hate playing Risk and Monopoly with, because I invent derivative money and all sorts of exotic contracts as an aid to diplomacy.

   But then again, I generally build knowledge by generalizing from specific concrete experiences. Maybe that bottom-up approach works badly for some people.

   Edit: I should say that these are some of the books I have read and can personally vouch for. There are several more like them in my stack of books to read. I can list some of those that I think are more promising, but I can't personally vouch for them yet.

   Second edit: oh, I almost forgot some of the most important parts. I don't have a specific reference, but double-entry accounting and financial reports are things that will teach you a lot of the basic terminology about assets, liabilities, equity, credit and so on.

   I suggest maintaining your personal (or your family's) books with double-entry. A great pplace to start is Plain Text Accounting.

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5. yborisJan 2021
   I came across this idea here first: Eliezer Yudkowsky’s Inadequate Equilibria -- great read!

   https://equilibriabook.com/

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6. yborisDec 2020
   I really liked the recent book by Eliezer Yudkowsky:

   Inadequate Equilibria: Where and How Civilizations Get Stuck

   Unfortunately there isn't a direct solution (if I remember right), as much as an excellent assessment of where things go wrong and why they are hard to fix (and thus a direction in which we can push to improve things).

   https://www.amazon.com/Inadequate-Equilibria-Where-Civilizat...

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