I started my journalism career covering the stock market. And over the years I’ve interviewed many traders, strategists, and fund managers. But I never heard the phrase “Chomsky trade” until last week when I read “America tampers with the Chomsky trade at its peril,” a Financial Times op-ed by Mark Blyth, a professor of political economy at Brown University. From that piece:
There is a trade in finance known among some as the “Chomsky trade”, after the linguist and social critic Noam Chomsky. Mr Chomsky once pointed out that, if you want to know what’s worth investing in, look at what US federal research funding organisations such as the National Institutes of Health (NIH) and the Defence Advanced Research Projects Agency (Darpa) are investing in today, and then go long 30 years. In the 1950s, the big thing was transistors, which gave us the microelectronics revolution in the 1980s. In the 1960s, it was digital processing, which gave us personal computers in the 1990s. In the 1970s it was biotech, which started to come on line in the 2000s. And in the 1980s, it was the beginnings of machine learning and big data, which will transform much of the world of work in the 2010s and beyond. . . . Despite the ill-informed claims of politicians, the US government and the US taxpayer are the critical investors in basic scientific research, not the private sector. Private foundations fund only 6 per cent of US research and development. The federal government funds 55 per cent.Now I’m not sure this is practical investing advice. For instance: Would knowledge about government aid to the embryonic semiconductor industry during the Eisenhower years necessarily have led you to invest in the best-performing stocks of the Reagan years, a lot of whom were retailers such as Walmart? (Though to be fair one retailer was Circuit City, the best performing stock of the decade, though that was a story about superstore innovation not tech innovation.)
Of course Blyth’s point is really one about public policy, not investment strategy: Government is the key driver of basic research, which as defined by the National Science Foundation is “activity aimed at acquiring new knowledge or understanding without specific immediate commercial application or use.”
But the numbers I have been able to dig up tell a somewhat different, or at least more nuanced story:
First, federal agencies provided only 44% of the $86 billion spent on basic research in 2015, according a recent Science magazine analysis, citing National Science Foundation data. That’s down from 70% in the 1960s and 1970s. Business spent a significant amount, $24.5 billion, or nearly 30% of total basic research spending. And its role has grown in importance over the decades.
Second, if you change the focus from basic research to applied research, business is really the leader with about 70% of total spending....MOREPardon me a moment as I consult the Chomskybot at "http://rubberducky.org/cgi-bin/chomsky.pl" for commentary:
Look On My Words, Ye Mighty, And Despair!
...This suggests that the descriptive power of the base component delimits nondistinctness in the sense of distinctive feature theory. If the position of the trace in (99c) were only relatively inaccessible to movement, a descriptively adequate grammar is to be regarded as a parasitic gap construction. It appears that the notion of level of grammaticalness is necessary to impose an interpretation on irrelevant intervening contexts in selectional rules. Let us continue to suppose that an important property of these three types of EC may remedy and, at the same time, eliminate the system of base rules exclusive of the lexicon. Conversely, the appearance of parasitic gaps in domains relatively inaccessible to ordinary extraction is unspecified with respect to the ultimate standard that determines the accuracy of any proposed grammar.Sounds about right, penny stocks in Europe. Deer nuts* to glory!
*(under a buck)