“Purely mathematical approaches to the economy have a big drawback: the irrational behaviour of people.”
This seems like nonsense. Are people more chaotic than the weather?
Most things are chaotic, and provably unpredictable at the micro level, but that does not make them unstudyable, in terms of mathematics. Secondly, people are clearly not totally irrational, so one might expect the rational behavior of people to be the unusual feature in an otherwise totally chaotic system.
A decade ago, physicists discovered a real problem: most of our energy is missing. Something, call it dark energy, is causing the expansion of the universe to accelerate.
Paul Gough, a prof at Sussex has an extremely interesting and simple idea that links dark energy to information entropy.
He looks at the energy of the universe not just in terms of overall mass and radiation, but particles at particular temperatures. The average energy per bit is estimated to give a measure of increasing information energy which creates effects that are equivalent in magnitude to dark energy.
His idea seems to be roughly as follows:
The number of particles in the universe is roughly constant but the universe is increasing in volume. As gravity clumps matter together stars form, creating hot spots which increase the average energy per particle and therefore total information energy.
As the universe expands its ‘bit space’ increases, and the information density decreases, rather like putting the same data on a larger hard drive.
The natural reduction in information energy density caused by expansion is lessened by the hot spot effect and the total information energy increases. The data on the bigger hard drive got bigger.
The equation showing the energy per bit is co-incidentally the same as that showing the characteristic value of a cosmological constant and it gives a value which is as low as the surprisingly low one that fits observation.
Assuming that the cosmological constant and information energy co-incidences are real, a resulting ‘negative-pressure state parameter’, equivalent to dark energy, causes the increased rate of expansion of the universe.
Jim Nachlin has a site with a collection of transcriptions of his audio cassettes. My favorite is the answering machine from the Soho Loft that he grew up in from the 70s. In a complete reversal of today, NY outside was scary, but lofts were cheap enough to ride a bicycle inside.
This is the answering machine tape from my parent’s place at 46 Great Jones Street.
It won’t be of much interest to you if you’re not Maggie Nachlin, Wendy Young, Jason Leaf, Matt Israel, Ben Posnack, Sonya Newell, Isabel Pippolo, Lisa Townsend Rogers, Mikaela Frank, Doug Margolis, etc. (or David Galbraith)
The place was two lofts, the third and fourth floor, of an 1880s factory building, in which my sister Maggie and I grew up. My parents bought them in 1970 or 1971 when they were cheap and their friends said “why the hell are you moving all the way over there”, so let that be a lesson to you, real estate speculators, not that you haven’t learned it already. It was great growing up there. New York in the late 70s and the 80s sucked, so I spent a lot of time indoors. I learned to ride a bike in there. These were big apartments.
There are two main reasons why I like Dave Pell’s new blog, ‘The Skeptical Hypochondriac’:
1. I’m a skeptic;
2. I’m a hyprochondriac.
“Ineffective treatments don’t cure an illness, so sufferers demonstrate them to more people than those who recovery quickly after taking real medicines.”
A mathematical evolutionary fitness model was used with variables for a treatment’s:
Rate of adoption and abandonment.
Effectiveness.
Odds of recovering naturally or dying.
Starting from one person demonstrating a treatment, either fake or real, it measures the rate of spread.
Fake things that people want to believe often cannot be absolutely disproved (particularly if they are placebos, like homeopathy or religious treatments such as praying), they spread better because treatments and evangelizing periods are longer since they do nothing, and people are not good at measuring success.
Situations where evidence is more likely to be persuasive, such as recurring diseases, tend to weed out quackery more naturally.
Clearly this has important implications for all sorts of areas from steak knife peddlers to management consultants and therapists.
If the model applies generally, for example, therapists would be more successful if fraudulent or bogus.
Institute of Economic Affairs Interview
Cern Open Day Talk
Lift Conference Talk
Essays:
Most recent essays are here, on Medium
Money & Entropy (on Medium )|The UX of Banking (on Medium )| The Real Meaning and Future of Apple’s Mantra: Designed in California ( on Gizmodo )| How to Respond to Legal Threats with Cute Animals (on Gizmodo )| There is no such thing as invention ( on Medium ) | The Long Tail is Wrong ( on Medium ) | Lessons from a prelude to Pinterest (on Gigaom ) | The Path to Pinterest, visual bookmarks and grid sites (on Gigaom ) | Use Case Study House #1 – A house designed like a web application | Internet Pawn | Tech Crunch | The Big Apple | Demystifying-Demistifying | Tim Berners-Lee. Confirming The Exact Location Where the Web Was Invented | Ten things that defined the noughties | Social networks and creativity | Imagining the iPad | Susan Boyle and the second Great Depression (on Smashing Telly ) | Information and Evolution | What Comes After Lofts and the Suburbs | The Joe Ades Myth Deconstructed | Goodbye Dubai ( on Smashing Telly )
More talks:
Is the conventional bank model broken? Financial Times: Camp Alphaville, London
Beyond WWW, the cultural impact of the Web CERN, Switzerland
The Semantic Web SXSW Conference, Austin
Revolutionary Search Technologies SXSW Conference, Austin
The Post Spider World O’Reilly P2P Conference, San Francisco
Using XML for News Aggregation & Delivery WWW conference, Amsterdam
Working Out of the Box Archinect
What mistakes to Avoid in Web 2.0 (I was so wrong – cringeworthy)
Dr Fedoroff science and technology advisor to the US secretary of state since 2007 says that humans have exceeded the Earth’s “limits of sustainability.
The Current world population is 6.8bn. In Roman times, it was less than the population of the US. It is growing by 218,030 people per day.
To put this is perspective, this is the entire population of Iceland every day and a half.
The FT has an embedded Twittering reporter at the G20 protests, here: a few broken windows at RBS just now.
My favorite tweet: “#G20 Best banner so far – Make love, not leverage”.
The New York Times prints a resignation letter from Jake DeSantis, an EVP of the AIG’s financial products unit after being hounded for his three quarters of a million dollar bonus.
Imagine DeSantis was in a gold medal winning Olympic relay team, where several of the members cheated.
From his letter:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
Translation: Its not my fault, why should I give up my medal, I didn’t cheat. Take the other guy’s medal back. I don’t care about the team, what about me.
After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.
Translation: Although I knew other members were taking reckless risks, this meant our team might win big, it was the best team to be in. I didn’t do anything at the time, but when they were caught, I helped with the doping enquiry, therefore I should keep my medal and be awarded another one. Its so unfair, everyone is against me, its nothing to do with me, I trained well and ran well. I’m not giving my medal back so you can decide who to award it to, I’m giving it to whoever I want.
DeSantis is someone who thinks of himself as being isolated from the organization and team that rewarded him. Its less a case of the ‘I was only following orders’ excuse as: ‘I worked in the barracks not the gas chambers’.
If DeSantis had been working for a boutique ‘eat what you kill’ hedge fund, then selfishness would not be an issue, but he wasn’t.
McKinsey mapped innovation based upon the number of patents filed per company, the number of companies filing patents, the diversity of the sectors they were filed in and the growth in patent filing.
By measures such as these, Silicon Valley, Tokyo and Yokohama are twice as innovative as any other place on earth.
Big ‘old’ cities like Paris and New York do relatively poorly, but London stands out as being particularly dire with a measure of innovation equal to a provincial French city such as Grenoble, despite having a population 50 times its size (8M vs 150K).
Ah, but there is so much more to London as a financial capital?
But the banking industry has collapsed.
Ah, but there is so much more to London as the center of the country that brought us the industrial revolution?
But the manufacturing industry collapsed.
Ah, but there is so much more to London as a cultural capital?
But artists and creative types can’t afford to live there.
Ah, but there is so much more to London as a tourist destination?
But the weather…
The writing is on the wall for London. Its needs to invest in the future through innovation rather than the transient hubris of the Olympics, or its recent period of prosperity will mark the beginning of a secular decline. There were 1.8 million immigrants, representing 26 percent of the population, that flocked to London in the last ten years as the financial services industry sucked everything up in its wake. Many of these people were from developed countries with the ability and incentive to return home to places like Paris and Warsaw unless London promises more.
Via Oobject
James Galbraith (the son of J.K.) argues for a wartime scale peaceful mobilization to deal with the economic crisis through government initiatives.
“It was the war, and only the war, that restored (or, more accurately, created for the first time) the financial wealth of the American middle class. “
The problem with this is that where natural forces prevail, the most efficient means of creating wartime scale initiatives happen through – war. In other words, no government is ever going to persuade people to spend as much within the system (i.e. domestic economy) on things like infrastructure, global warming and energy initiatives without the galvanizing force of directed hostile energy, outside of the system that happens naturally in a conflict. If Galbraith is right in his pessimistic but non-hysterical analysis then the equilibrium state of the global economy creates a very high risk for a large war in 5 to 10 years.
But there is a silver lining. Galbraith himself notes that:
The deepest belief of the modern economist is that the economy is a self-stabilizing system.
Anyone that has studied physics knows that this is provably wrong. The economy is an open system: money flows in, work is done and goods come out. All open systems are held far from equilibrium and are prone to periods of unavoidable, and provably unpredictable instability.
In other words, the principal tenet of current economic theory is a provable fallacy. Which is a good thing, else there will certainly be a large war.
In the 70s, in Sweden, it was possible to pay more than 100% tax i.e. a raise would net less. The 90% TARP relief bonus tax tax would end up being over 100% for New York City residents (although half is shouldered by the company rather than the individual).
Here’s what AIG have to say about it:
To those who say it’s okay because taxpayers effectively own AIG, Gleckman said: “Do we really want Congress to micromanage the business practices of this firm? That’s the quickest way I know to drive the value of the company’s remaining assets to zero and guarantee taxpayers will get no return on their investment.”
Wrong.
1. No we don’t want the government to micromanage business practices, which is why the 90% tax will encourage companies like Goldman return TARP funds to avoid government micromanagement.
2. The quickest way to drive the value of a company like AIG’s assets to zero would be to have let it go bankrupt and not had any government intervention.
I suspect the 90% tax levy may not help bribe people to unwind things, where necessary. A better approach would be actively going after fraud.
Paul Krugman says:
“It’s not the way you should make policy — it’s clumsy, and it will punish some innocent parties while letting the most guilty off scot-free.”
But it is what it is and if it passes a senate vote, it shows that the US is capable of acting quickly, whereas the UK with its inaction over RBS looks spineless.