June 4th, 2007, 1:38 am
QuoteOriginally posted by: MCarreiraQuoteOriginally posted by: Traden4AlphaRamsey Theory is one tool for thinking about patterns that are unavoidable and thus helps one avoid being fooled by randomness.Which other tools do you suggest ?First, I was thinking mainly of all the tools in statistics, probability, and combinatorics that let one model the statistical inevitability of "pattern" in random sequences or the inevitability of barrier crossings (e.g., gamblers ruin). Second, I suppose logic and the scientific method would be the tool for thinking about biased sampling problems (e.g., survivor bias) or other problems associated with misinterpreting market data. Third, are the cognitive science studies that empirically show the predilection of the human brain to find non-existent patterns.What's interesting about Ramsey Theory is that it contains no assumptions about the system having probabilistic vs. deterministic behavior. Instead, it concerns statements that hold true for all states of the system whether realized or not. Ramsey theory can't be fooled by randomness because it is independent of randomness.And now that you ask the question, I'm sure there are other tools that speak to the certainties embedded in seemingly randomness. I'd imagine that percolation theory and graph theory could be interesting. Perhaps the most interesting tools are those from nonlinear systems dynamics because they invert the fallacy. The second definition of "fooled by randomness" would be one in which we declare the system to be random when it is not. Chaotic systems appear random and unpredictable, when they are, in fact, deterministic and controllable.