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Modern Times

Equations that claimed to predict human behaviour are blamed for Wall Street’s destruction. Increasingly, it seems, there is something naïve about maths

Manu Joseph Manu Joseph | 26 Jun, 2009

Equations claiming to predict human behaviour are blamed for Wall Street’s fall. Increasingly, there is something naïve about maths

Equations claiming to predict human behaviour are blamed for Wall Street’s fall. Increasingly, there is something naïve about maths

The aspiration of maths is to be philosophy. It is a more innocent ambition than the aspiration of philosophy to be government. Over the years, maths has tried to explain how everything began. Why an object falls. Why length, breadth and height are merely a human imagination of space. Why competing vegetable hawkers tend to flock together instead of standing far apart. A significant moment in the evolution of language was actually a moment in the history of mathematics, when Isaac Newton discovered a new way of saying something. Through the equation. Sometimes known as the formula.

In recent years, an increasing number of bright people have used the formula to predict human behaviour, and the patterns of our general financial emotions. Wall Street saw in these formulae a magical way of making money from money. That’s when things became messy or comical, depending on how much grouse you have. The collapse of investment banking is blamed on mathematical models like David X Li’s Gaussian copula function which appeared to prove on a piece of paper that there is a considerable emotional distance between different sets of people who are influenced by different types of loans, and so all of them will not behave the same way, like say default *en masse*. Earlier, in the 90s, the Black-Scholes options pricing model inspired the creation of a hedge fund called Long Term Capital Management, which earned billions of dollars before suddenly collapsing. These mathematical models claimed to have found accurate ways of understanding risk, and they turned out to be fundamentally flawed. The failure of contemporary maths in explaining people or predicting the impact of man-made events is part of a larger crisis that the field is going through today. In fact, increasingly, there seems to be something naive about the aspirations of maths. There is something naive about maths trying to explain human nature by creating models that work only if people are presumed to be rational. And there is something naive about maths trying to understand the universe through eleven dimensions (or has it increased to twelve?) because it did not get anywhere with four.

At the heart of respect, usually, is incomprehension. If urchins only fully knew what most of us actually did for a living they will not be in so much awe of us. They may, in fact, start laughing. In a way, our view of mathematicians is from an urchin’s point of view. We do not fully comprehend their language and so we grant them an easy halo. Anyone can spit on a writer, because everybody can judge his work. The very purpose of a writer is to be comprehensible to all (some Indian writers of what is called literary fiction will chuckle in secret disagreement). But, to question maths you must have uncommon knowledge. So mathematicians do get away with a lot. That’s why we have delightful rubbish like wormholes, and warp speed and time reversal. Fortunately, mathematicians have generally ill-tempered peers and it is through their venom that we now know that Wall Street’s favourite risk assessment models were ‘moronic’. And why, Stephen Hawking, after claiming that time can be reversed, apologised for making such a statement. Your grandmother, too, may have said, ‘rubbish,’ but that did not count. Hawking’s peers had to say it.

Maths is complex even to mathematicians. In its ambition to resolve the mysteries of the universe, it is now stranded in even more mysteries, some of which, scientists accuse, are its own creations. For instance, one sect of scientists now say that over 95 per cent of the universe is made up of things called dark matter and dark energy. Nobody knows what these things are (hence, dark) but equations predict them. Without them, modern physics does not make any sense. There are scientists who say that maybe these dark things do not exist. They are just products of maths. There was a time when something called the String Theory held a lot of promise in understanding the universe. But after over two decades of being in fashion, and proclaiming that there are trillions of universes, a reason why our universe must be spelt with a small ‘u’, the theory is slowly losing its charm.

True, the age of maths is only a fraction of the age of gods and godmen. Probably, one day it will answer all our questions, even the ultimate question—why is there something instead of nothing?

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