Need help with logic: exploiting an inefficient system...

[Archvile]

In light of the recent worldwide financial recession and stuff, I've started wonder about the definition of efficiency and the way it applies to different systems or environments.
So I thought there couldn't be any better place to ask this than an INTP forum, right?

Ok, here we go:
Let's say we have some kind of system and a certain, critical part of this system is inherently inefficient by it's very nature. Now let's add a second system whose survival depends by part or entirely on the exploitation of this specific weakness of its host, which it does in a quite effective way.

Let's take a virus or parasite for example, it alters the behaviour of the host organism so that it fulfils the purpose of its 'guest' in a far more effective way, than it could have ever fulfilled the original purpose which it was designed for. At this point, can we still talk about an 'inefficient' system, even though it exceeds the effectiveness of its original intention, despite the fact that its new state might be the exact opposite of what it once was?

Does the very act of exploitation transform an inefficient system into an efficient one?

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[Hustler]

Does the very act of exploitation transform an inefficient system into an efficient one?

That's the theory. Once all of a system's inefficiencies are maximally exploited, there is no way to further exploit the system and, as such, it must be considered efficient. Generally what happens is that competition arises to exploit the inefficiencies, and this competition eventually drives out the inefficiencies on which the competitors are thriving, creating an unexploitable situation for all.

If you want a good example of this phenomenon in action, check out parimutuel (http://en.wikipedia.org/wiki/Parimutuel) betting, which is what is generally used in horse races.

[Archvile]

Does that mean that a system must be categorically exploited to become efficient?


If you want a good example of this phenomenon in action, check out parimutuel betting, which is what is generally used in horse races.

That's cool. I've never been into horse racing. Maybe it's even a valuable alternative to poker...

[Hustler]

Does that mean that a system must be categorically exploited to become efficient?
No. I suppose an unexploitable system could be designed. A sort of Nash equilibrium situation. Consider the perfect Tic-Tac-Toe strategy. This cannot in any way be exploited. In much more complex systems, such as the stock market, inefficiencies have always historically been found. There's no law that says this must always be the case, but it generally always is, and the system gets more efficient the longer it is analyzed for exploitation purposes.


That's cool. I've never been into horse racing. Maybe it's even a valuable alternative to poker...
It's a hell of a lot harder to make a living betting horses than it is playing poker. That said, it's also possible to make a hell of a lot more money doing so.

[Archvile]

Wow! Good answers, thanks! One last thing though:
Is there a quick & dirty way to discover weaknesses/inefficiencies in any system? (like financial markets, law, social systems etc...) Any book recommendations?

[Hustler]

Wow! Good answers, thanks! One last thing though:
Is there a quick & dirty way to discover weaknesses/inefficiencies in any system? (like financial markets, law, social systems etc...) Any book recommendations?

No, not really. I'm pretty sure that's what things like graduate school or law school are for.

[thod]

In light of the recent worldwide financial recession and stuff, I've started wonder about the definition of efficiency and the way it applies to different systems or environments.


The boom-bust cycle should not be thought of in terms of efficiency. It is more like the fox-rabbits growth and dieback cycles seen in nature. The animals remain the same and equally efficient.

[quantumzero]

Does that mean that a system must be categorically exploited to become efficient?



That's cool. I've never been into horse racing. Maybe it's even a valuable alternative to poker...

Dont, its a big lie. There are way more variables to consider, like the jocky's propensity to cheat,the horse snapping a leg, etc. etc. They're all a bunch of liars. There's an old joke that goes something like, "how do you end up with a million dollars? ... Start with ten million and by a race horse" or something to that effect.
So the inefficiency goes to the owners and wagerers, and the efficient clean up goes to the House.
Probability where art thou?!
Well, if you dont go overboard, there are some ten cent superfecta's that could really pay off. but dont, its a snare! and maybe a tri box and turn it around for a few bucks.
Poker has way better odds, but horse racing is a rush, and all the numbers that are posted will enthral you until you dont even know your name, and you're poor, and pitiable, and naked and blind.

[Hustler]

Dont, its a big lie.

Not entirely. (http://www.laytheodds.com/horseracing/articles/23/1/Bill-Benter-Computerized-Attack-on-Horse-Racing/Computerized-Attack-on-Horse-Racing.html) It's just really hard.

[Archvile]

I'd like to add at this point, that I don't think horse racing actually applies as an example for an inefficient system. Sure it was exploited, but was it really inefficient in the beginning?
Or did it only become inefficient after there were ways discovered to make more money out of it?
Perhaps there are more, clearer examples of inefficiencies and ways they were used...
.

[Hustler]

I'd like to add at this point, that I don't think horse racing actually applies as an example for an inefficient system. Sure it was exploited, but was it really inefficient in the beginning?
Or did it only become inefficient after there were ways discovered to make more money out of it?
Perhaps there are more, clearer examples of inefficiencies and ways they were used...
.

This distinction isn't really meaningful. It smacks of "If a system is inefficient in the woods and nobody is there to exploit it, is it still inefficient" type thinking. The horse betting market is inefficient. If it weren't, the public would always pick according to the true odds of the race. But, they don't, and it's in this inefficiency that people find ways to exploit the system to their own advantage.

[Archvile]

AH ok, I can see your point there...

[Lethal Sage]

The boom-bust cycle should not be thought of in terms of efficiency. It is more like the fox-rabbits growth and dieback cycles seen in nature. The animals remain the same and equally efficient.

I think you are mistaken. While clearly not as fast moving as markets such as porn, the overall landscape moves towards increased efficiency.

[Denzien]

Dont, its a big lie. There are way more variables to consider, like the jocky's propensity to cheat,the horse snapping a leg, etc. etc. They're all a bunch of liars. There's an old joke that goes something like, "how do you end up with a million dollars? ... Start with ten million and by a race horse" or something to that effect.
So the inefficiency goes to the owners and wagerers, and the efficient clean up goes to the House.

I worked at Santa Anita Park when I was in High School. In the morning, one armored truck dropped money off. In the evening, two armored trucks picked money up.