Another must read things that make you go hmmmm

Classical conditioning (also Pavlovian conditioning or respondent con- ditioning) is a form of learning in which one stimulus, the conditioned stimulus or CS, comes to signal the occurrence of a second stimulus, the unconditioned stimulus or US. The US is usually a biologically significant stimulus such as food or pain that elicits a response from the start; this is called the un- conditioned response or UR. The CS usually produces no particular response at first, but after conditioning it elicits the conditioned response or CR. Classical conditioning differs from operant or instrumental conditioning, in which behavior emitted by the organism is strengthened or weakened by its conse- quences (e.g. reward or punishment).

Conditioning is usually done by pairing the two stimuli, as in Pavlov’s classic experi- ments. Pavlov presented dogs with a ringing bell (CS) followed by food (US). The food (US) elicited salivation (UR), and after repeated bell-food pairings the bell also caused the dogs to salivate (CR).

In short, by associating the sound of a ringing bell with the appearance of food, Pavlov condi- tioned dogs to salivate merely at the sound of the bell.

For many years, this classical conditioning has been prevalent across financial markets the world over but, while its prevalence cannot be doubted, it has remained unobtrusive for one reason and one reason only—it has worked al- most flawlessly. On Wall Street, however, no suc- cessful idea was ever an orphan and so classical conditioning’s fruits were passed off as those of heightened intellect amongst the great and good of the financial world. (Wikipedia)

This week’s must read Hmmm 10 Jun 2012