Pi

Media Type: Film Clips Topic: Graphing, Behavioral Economics

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This psychological thriller tries to make sense out of chaos. The title refers to the mathematical constant, π (pi). In the film, Max Cohen is using his supercomputer to find predictable patterns within the stock market. What makes the film especially interesting are the three assumptions that rule Max’s life:

(1) Mathematics is the language of nature;
(2) Everything around us can be represented and understood from numbers;
(3) If you graph the numbers in any system, patterns emerge.

Based on these assumptions, Max attempts to identify a mathematical pattern that will predict the behavior of the stock market. As Max gets closer to uncovering the answer he is pursued by a Wall Street firm that wishes to use Max’s discovery to manipulate the market and a religious person who believes that the pattern is a code sent from God.

If the world can be reduced to a set of predictable patterns, then the idea of rational human beings driven to maximize their utility (Chapter 16) and firms that seek to maximize their profits is a very powerful approach (Chapters 8-13). If, however, the state of nature is more akin to chaos, and filled with all sorts of unpredictable behaviors, then the predictive power of the economic approach is reduced. π illustrates the basic human desire seek out patterns where none exist and to try to find order in chaos.

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