November 30, 2004

Economics is isomorphic with risk?

Adam Shostack writes, commententing on AMS's aphorism directly below, that

" [it must be] Economics. There's more to our dismal work than risk management: There's the study of signaling, investment choices, and a host of issues which are broader than just risks."

Which, I feel, just underscores the point! Signalling is how we say that we are a good risk; choice of investments is a choice of risk & return; and my original claim of risk being an isomorphism for the popular term of economics derived from something like this:

"when you say 'it's economics' that means I'm not going to get my money back, right?"
Posted by iang at November 30, 2004 09:43 PM | TrackBack

Your basic intermediate decision sciences text book teaches constrained optimization as the basic tool. For economics, however, optimization is only the first step--then you have to compute equilibrium. I'm not sure we can say that security is really about economics if we don't take the broader, social welfare analysis approach.

Posted by: allan at December 1, 2004 10:50 AM

Well, and this confusion as to what economics is was the basic thrust of my uncertainty on the aphorism.

I think the view of the econmists is that everything is about economics. In this sense, what we can learn from this is that security cannot avoid being part of economics, in the sense that humans act, systems respond, and each of these events causes costs which drive further actions.

What it isn't saying is that we stop studying crypto and start studying economics; more like, study crypto, then use economics to apply that to the real world.

Posted by: Iang at December 3, 2004 06:21 AM