Sharing information about BICs and showing its superior power in addressing Economic, Financial, Mathematical & Current Issues through the dissemination of relevant material and occasional review of news and articles
A talk at Institut de Hautes Etudes Scientifiques providing an overview of the mathematics of Grothendieck
One of the rare instances of recorded voice of Grothendieck speaking on the meaning and value of scientific research in the context of rejecting research for the development of nuclear weapons:
Recent testimony from a variety of Grothendieck contemporaries (Courtesy Tony Iarrobino)/
My thesis "Reliving the Life of Louis Bachelier" which introduces the screenplay: "I, Bachelier (Invisible Man)" is now available as a book!
This book is a verbatim reproduction of the ALM Thesis in literature and creative writing that I have just completed at the extension School at Harvard University. It is a screenplay that brings to life, in dramatic installments, the key events in the life of the Father of Modern Mathematical Finance, Louis Bachelier ( 1870-1946). It is a spellbinding double odyssey of the trials and triumphs of gritty characters that pioneer industries creating intellectual revolutions, against the scorn of titled scientific establishments, against tragedy, at tremendous personal sacrifice. Through multifaceted narratives and circumstances, it emerges as a profound, scientific and artistic, human exploration of the human propensity for prejudice. http://amzn.to/1S6Byqr
It lets sheds light on the struggles Bachelier had to overcome, as viewed in our time by a
young black mathematician of African origin named K., starting in grad
school in Paris in the mid-90s, and then on to Wall Street, as a
proponent of a new theory of decision making based on a
proto-probabilistic concept called BICs (Basis Instruments Contracts)
that he has invented.
It spans Bachelier’s life from the death of his
parents to his famous thesis in 1900, to the dramas of the Dreyfus
affair in France, WW I, up to the death of his ephemeral spouse, and the
climactic denial of tenure to him in 1926. The narrative unfolds as K.
himself experience similar struggles and prejudices in modern times
which lead him from Wall Street to inner city life in Newark, NJ, and
then to Beijing China, and back to New York. The intertwined narratives
unfold in at least four languages – English, French, Mandarin Chinese,
Ghomala – serving as a clinical and scientific examination of the
various dimensions of prejudice, language, deriving analytical insights
that bind persuasion, risk, prejudice, rewards and punishments in the
decision making process. It also features two heart wrenching love
stories that grip hearts and reveal characters of great humanity. This
is a universal story of the travails of the misunderstood and
unappreciated underdog, who nonetheless keeps on soldiering to usher in a
better world.
This post is meant to refer to a knol Ihave written in response to a recent question posed on the Institute for New Economic Thinking (INET) community website : “Will public deficit reduction encourage private sector growth, or undermine a needed stimulus to recovery & lead to Japan-style stagnation?” This lead me, in view of my work on BICs, to wonder whether the deficit is really the right metric to focus on and analyze the extent to which it could be misleading.
I argue that the government balance sheet, rather than its cash flow position -from which the deficit is computed - should really be what eyes are focused on. The focus on balance would have and should better focus minds on stimulating high returns investments for sustainable recovery and expansion, some of which I discuss.
BICs enter in the picture because using their methodological prescription would make reliable and practical the complex and almost canutian task of computing the values of the different items on the government balance sheet.
The debated on financial reform as summarized by Krugman in his latest piece in the NYT seems to have boiled down to the Volker position of limiting the size of financial institutions so that they do not reach a too big to fail size or the position of Krugman of tight and generalized regulation of Banks and shadow banks.
It seems to me that both analysis miss the simple but central ingredient needed to secure the financial system while not impending economic growth and that is a centralized clearing of all trades. Centralized clearing by nature remove a lot of the incentives in the buildup of too big to fail financial entities, it brings a level of transparency that all times gives regulator a clear picture of the dangers in the positions taken by financial/ economic actors.
A simple example to illustrate the power of centralized counterparty on trades. When you go online to buy an item or at the to a store and you use a credit card, that transaction is facilitated and secured by the existence of a centralized counterparty who keeps track of your assets and liabilities and authorize the transaction only when you have enough credit. No party to the transaction takes credit risk on the other and the system is robust. If the same worked among financial trading institutions the same efficiency and security would be gained, eliminating much of the systemic risks that are the source of current concerns.
He explains that because really stimulative programs that were part of the stimulus would only stimulate much later, there is no basis for declaring the stimulus plan passed earlier in the year was insufficient and that we need a new one.
Indeed Krugman has held a different view for a long time. So I just checked his blog and there is an entry on the article titled "Bruce Bartlett misstates the problem"
he points out the statement:
"The problem is that the Obama administration was much too optimistic about how quickly stimulus spending would affect the economy. Christina Romer, chair of the Council of Economic Advisers, and Jared Bernstein, chief economist to vice president Joe Biden, forecast in January that the stimulus would reduce unemployment almost immediately."
and points that it is inaccurate.While this may be factually true, it seems to me it does little to invalidate the central argument Mr. Bartlett is actually making.
I wish there would be more Krugman substantiation of the statement: "The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted."
I would be very interested in finding data quantifying the scope of shovel ready projects with large multiplier effects.
As I have written elsewhere projects with network effects as described in my holistic theorem would have the biggest stimulative impact, possibly at the lowest cost.
These include -network infrastructure projects such as roads and bridges, in particular near housing developments (These would help support prices of houses in those areas by making the developments more easily accessible to urban work areas) - internet infrastructure development projects -electrical/smart grid development projects -Financial Services central clearing
The question to me is how many(number and budget) can be moved along, on what timeframe,
07/09/09 - Here's the WSJ survey of economists on the question:
This article documents the self reinforcing phenomenon of popularity lists. The more an article is listed as popular, the more it becomes popular. It is the same dynamic that leads to the formation of too big to fail entities as described in the presentation below.
Awereness of this bias should lead to antitrust type policies to correct it where it affects decision making with potentially dangerous consequences such as in the insurance industry.
