Last Days of Linearity in Business Analytics

What is it about?

Linearity has always been an attempt to simplify economic and mathematical models. Students of economics as a rule remember lectures on macroeconomics when, somewhere at the very beginning, the lecturer drew two intersecting lines of supply and demand. And then, over a long period of time, these lines became fat, took the waved form, or changed the direction of their convexity. It would be interesting to immediately plunge into the world of reality, ignoring a whole series of incredible assumptions. Of course, no one is going to reject such linear models as Fama-French analysis and the wonderful toolkit taken from game theory. However, there is a serious temptation to stray from the traditional path from time to time.

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Why is it important?

We live in a world armed with modern computer systems, modern calculation methods, and artificial intelligence. We no longer need to distort reality by analyzing it. Linearity of models is not only a simplification. This is a distortion. Interestingly, help to economists can come from physics or other sciences. And there remains the last problem, which bears the famous name "human factor".

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