News You Can Use From The BMJ—"Cheers not tears: champagne corks and eye injury"

From the British Medical Journal:

BMJ 2023; 383 doi: https://doi.org/10.1136/bmj.p2520 (Published 20 December 2023) Cite this as: BMJ 2023;383:p2520 

Be careful this holiday season: ocular trauma while opening bottles of fizz can be significant—and easily avoided, advise Ethan Waisberg and colleagues.

The joyful effervescence of champagne is often associated with celebration, happiness, and the holiday season. The rapid release of carbon dioxide gas after uncorking a bottle of sparkling wine is a memorable moment enjoyed by all, regardless of whether you drink alcohol. But there is a dark side to uncorking these bubbly beverages.

Cork eye injuries are an often overlooked and substantial threat to ocular health. Although our group usually publishes on the effects of spaceflight on the eye,123 this article focuses on the launch of sparkling wine corks instead of astronauts. The goal of this article is to ensure that you don’t begin the new year on the operating table of an eye surgeon.

Permanent blindness
This warning might at first sound overly cautious, but the American Academy of Ophthalmology has a public safety campaign, “Uncork with Care,” that gives practical tips for safely uncorking fizz bottles due to the “serious, potentially blinding eye injuries” that occur every year.4 The pressure in a 750 ml bottle of champagne or sparkling wine is about three times that of a standard car tyre, with the potential to launch a cork up to 13 m at speeds of up to 80 km/h.45 A cork can travel from bottle to eye in less than 0.05 seconds, making the blinking reflex ineffective. A cork hitting an eye can cause permanent blindness, retinal detachment, and lens dislocation, among other conditions. In May 2022 cyclist Biniam Girmay opened a bottle of prosecco on the winners’ podium to celebrate his win at the Giro d’Italia. The cork hit his eye causing an anterior chamber haemorrhage, and he had to withdraw from the next stage of the competition.6

A retrospective review published in 2005 analysed cases of severe eye injuries resulting from bottles containing pressurised drinks in the United States, Hungary, and Mexico.5 Champagne bottle corks were responsible for 20% of the eye injuries related to bottle tops in the US, 71% in Hungary, and 0% in Mexico.5....

....MUCH MORE

 Possibly also of interest at Interesting Engineering, January 24, 2024:

A study shows the science behind the cork of a champagne
Researchers explore the fluid mechanics behind the festive fizz, from popping corks to shock diamonds, offering a sip of scientific delight.

It Looks Like Elon Musk Called It, This Was "A Spicy Year"

Apparently Mr. Musk has changed his name on X. Newsweek a few hours ago:

What Is Kekius Maximus? Elon Musk Changes X Name

And from his official account, March 26:

This will be a spicy year pic.twitter.com/XG3pWJGS10

— Kekius Maximus (@elonmusk) March 26, 2024

When we first posted the tweet, April 2:

Stock market today: Dow sinks nearly 400 points, yields rise to 2024 highs" (TSLA)  

The outro was:

The industrials are off 463 while Tesla is down $9.57 (-5.46%) at $165.65.

Here's the Tesla story, also at Yahoo Finance:

Tesla stock slides following big Q1 delivery miss

Today the stock is changing hands at $

410.09, down considerably from the $488.54 all-time high earlier this month but up from that April 2 post.

Spicy indeed.

On This Date in 1935 the Game "Monopoly" Was Patented (economist Henry George does a cameo)

After the jump we have one of the dice cheats you can use if some smart-ass 10-year old is getting the better of you.

The fellow who patented the game, Charles Darrow, did not invent it, did not improve it and pretty much did nothing but file for the patent, which the USPTO granted;  Patent Number 2,026,082 on December 31, 1935.

"I think it's wrong that only one company makes the game Monopoly"

-comedian  Steven Wright

We've looked at Henry George a few times, links after the jump.
First up, from BT.com:

December 31, 1935: Charles Darrow patents the board game Monopoly 
A salesman granted himself a licence to print money when he patented the World's most popular board game on this day in 1935. 

The most successful board game of all time, Monopoly - which would go on to be printed in more than 40 languages and licensed in well over 100 countries – was patented on this day in 1935 by a salesman from Philadelphia named Charles B. Darrow.

After convincing the Parker Brothers company to publish the game, its ongoing success would make Darrow the first ever millionaire game designer. It would later be established, however, that Monopoly was simply a development of other, previously existing board games which dated back to the turn of the century.

In 1903, an anti-monopolist named Elizabeth ‘Lizzie’ Magie had created what she called The Landlord’s Game, intended to show the negative aspects of allowing too much land to be held by private monopolies. She took out her own patent a year later.

In 1903, an anti-monopolist named Elizabeth ‘Lizzie’ Magie had created what she called The Landlord’s Game, intended to show the negative aspects of allowing too much land to be held by private monopolies. She took out her own patent a year later....MORE (Internet Archive, link rotted)

BT knows a thing or two about monopolies, past and present.

And From Henry George.org:

How Henry George's Principles Were Corrupted Into the Game Called Monopoly

History is filled with surprising stories of how people and ideas are connected. One such story is that of the origins of the most popular board game in modern history. It's an American classic: each new generation of Monopoly players learns to love (harmlessly) indulging its cutthroat, ruthless, greedy impulses. Players begin the game as equals. Luck — and a bit of strategy — eventually enables one player to dominate all others. That player ends up amassing a huge fortune in cash and real estate. Most Monopoly players don't know (or care) that this game was originally the product of a passion for social and economic justice. In the late 1800s, a young woman named Elizabeth Magie was introduced to the writings of Henry George by her father. She eventually became one of many people who took on the task of trying to teach others what she had learned from studying Progress and Poverty and George's other works.

Collaborating with friends in her Brentwood, Maryland community, Elizabeth Magie created The Landlord's Game. She applied for a patent, which was granted on January 5th, 1904 (No. 748,626). She explained that the game was to be a "practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences." While still a young, single woman, Elizabeth -- or "Lizzie" as she came to be called -- became a regular visitor to the Single Tax enclave of Arden, Delaware. This was around 1903. Whether on her own or in conjunction with other Single Taxers in Arden, Lizzie continued to work on the design of The Landlord's Game as a way to explain how Henry George's system of political economy would work in real life.

Arden landmarks: Stephen's Theater and the Craft Shop.
For a close-up look at the game board used in Arden, Click here.

The First Commercial Versions of The Landlord's Game

In 1906, Elizabeth moved to Chicago, Illinois, where she met, and in 1910 married, Albert Phillips. I have not been able to find any reference to Albert as a follower of Henry George, but evidently he was sympathetic to his wife's efforts. At some point in 1906 Elizabeth and a number of other followers of Henry George established the Economic Game Company of New York, which published The Landlord's Game.
Sometime soon thereafter Elizabeth and Albert moved to Clarendon, Virginia, in the Washington D.C area and eventually patented a new edition of The Landlord's Game in 1924 (No. 1,509,312) under her married name of Elizabeth Magie Phillips. This new edition, published by the Washington, D.C. firm, Adgame Company, appeared in 1932 and included named streets and other changes in the appearance of the board. More importantly, the new edition included a second, alternative, set of rules and a second name for the game, Prosperity.

Connections with Academe

Around 1900, Scott Nearing was introduced to The Landlord's Game by either Lizzie Magie or other residents of Arden. He was at the time a full-time resident of Arden. Nearing went on to become a member of the economics department at the University of Pennsylvania in 1906, where he used The Landlord's Game in his teaching. His support of Henry George's proposals to raise pubic revenue exclusively from those who owned land, and his opposition to child labor, caused him to be dismissed from the university in 1915.
Burton H. Wolfe, in "The Monopolization of Monopoly" (San Francisco Bay Guardian, 1976), says that "Nearing played The Landlord's Game with his brother, Guy Nearing, who lived in the Henry George single tax community of Arden, Delaware." Then:

As the students and single taxers played the game, they began a process ... of altering the rules. The main change was that instead of merely paying rent when landing on a property block, the players could hold an auction to buy it.       They also made their own game boards so that they could replace the properties designated by Lizzie Maggie with properties in their own cities and states; this made playing more realistic. As they drew or painted their own boards, usually on linen or oil cloth, they change the title "Landlord's Game" to "Auction Monopoly" and then just "Monopoly".

Burton Wolfe also tells us that a young Rexford E. Tugwell was one of the players. One of Tugwell's own students, Priscilla Robertson -- long-time editor of The Humanist -- provided the following details on the early history of the game: "In those days those who wanted copies of the board for Monopoly took a piece of linen cloth and copied it in crayon. It was considered a point of honor not to sell it to a commercial manufacturer, since it had been worked out by a group of single taxers who were anxious to defeat the capitalist system." (I am obliged to note here the considerable misrepresentation of the objectives pursued by Single Taxers who shared Henry George's principles. Defeating monopoly in all its forms (but, particularly, monopoly of nature), not capitalism, was - and is - the cause embraced then and today.)

Other writers note the game was played by students at Princeton University and Haverford College. Changes were made to the board design, gathering the properties into groups, allowing buildings to be added to the locations and increasing the amount of rent charged based on the number of like properties owned.

By the late 1920s, the version of the game being played by college students and others had evolved quite a bit from Elizabeth's design. The game was now generally referred to as "Monopoly." A young student at Williams College (Reading, Pennsylvania) produced a commercial version under the name Finance, but the game was essentially Monopoly. Then, a woman named Ruth Hoskins who learned the game in Indianapolis moved to Atlantic City, New Jersey and supposedly created the version that included the Atlantic City street names.

Then the plot thickens. The game was introduced by Eugene (Colonel) and Ruth Raiford, friends of Ruth Hoskins, to Charles Todd, who lived in Germantown, Pennsylvania; and, Charles Todd then introduced the game to Charles and Esther Darrow. Eugene Raiford, Charles Todd and Esther Jones Darrow all attended the Quaker Westtown School from 1911 to 1914 or 1915. The subsequent connection with Atlantic City occurred because of the close association of the Westtown School with the Atlantic City Friends' School. As Todd later recalled: "The first people we taught it to after learning it ... was Darrow and his wife Esther. ...It was entirely new to them.... Darrow asked me if I would write up the rules and regulations and I wrote them up ... and gave them to Darrow."...

...MUCH MORE

And Henry George?

...In a January 1936 interview in The Washington Star, Elizabeth was asked "how she felt about getting only $500 for her patent and no royalties ever. She replied that it was all right with her "if she never made a dime so long as the Henry George single tax idea was spread to the people of the country."...

If interested see also: 

• "Monopoly is Theft: The antimonopolist history of the world’s most popular board game" 
• "How Land Disappeared from Economic Theory" 
• The Real Real Estate State and Artificial Scarcity, Technology and Planning

And cheating at dice, "The Whip Shot - Dice Control":

One of the cheat's moves to determine and control the outcome of a throw of two dice is known as the Whip Shot. Learn how cheats can guarantee what numbers are thrown.

Also known as the Peek Shot, the Pique Shot, the Drop Shot and the Hudson Shot. This shot takes more skill than the simple Blanket Roll, but a cheat will make great effort to learn this shot because he can control with certainty the numbers thrown. It doesn't merely change the odds like the Blanket Roll, it sets the result as almost certain with the right conditions.

The cheat will pick the dice up and hold them in a Lock Grip with the desired numbers on the dice facing upward. They are given a false rattle, then the cheat rolls the dice forward with his thumb towards his fingertips (as shown in the diagram).

The cheat then snaps out his wrist with the motion of snapping a whip and throws the dice, but so that the dice spin rapidly like spinning tops without turning along the horizontal axis. The dice then land with the desired faces facing up. To prevent the dice bouncing on a hard surface, the cheat may sprinkle salt or sand on the throwing area, so they slide, or generally soften the surface where the dice are thrown. 

            

A variation and extension to the Whip Shot when throwing against a backboard is the Greek Shot.

Using the same hold you can perform the drop shot, which as the names says is the technique of dropping the two dies such that the upper die freezes the lower die in the position you've chosen, say a six. The upper die will roll away but what you have accomplished is to guarantee a minimum score of 7 (6+1) while additionally increasing the odds of a double 6 from 1:36 to 1:6.

It is strongly suggested that you not use these techniques in high-stakes backgammon games.

One last point:

Page 2 of the two page vintage instructions PDF:

https://www.hasbro.com/common/instruct/Monopoly_Vintage.pdf

"7 tons of cocaine found buried underneath farm in Spain..."

Is that a lot? That seems like a lot.

From CBS News, December 30: 

Spanish authorities said on Monday they had seized seven tons of cocaine stashed in sea freight containers buried underneath a farm, arresting three suspected smugglers. Police posted video of the seizure, showing officers digging up ground and retrieving dozens of packages containing the alleged drugs.

The Civil Guard police said they launched the operation on Friday when they detected two suspicious speedboats at the mouth of the Guadalquivir River.

The boats were tracked to a rural estate in the municipality of Coria del Rio, south of the city of Seville, where the suspects stored the drugs in two containers hidden underground....

....MUCH MORE

The article goes on to mention this story from November:

"Spanish police arrest ex-fraud chief after €20m found in walls of his house"

El Erian: "The Fed has two bad options in 2025: accept higher inflation or risk a recession"

From Project Syndicate (Dec. 24) via MarketWatch (Dec. 30/31):

El-Erian: Expect slower U.S. growth and higher Treasury yields — but America will continue to outperform other major world economies 

Political and geopolitical upheaval — and the limited prospects for significant improvements — pose a risk to U.S. economic exceptionalism.

It is something of a tradition every December to take stock of the year that is ending and consider what might lie ahead. This is true on a personal level: in my family, we tend to do this around the dinner table. It is also true more broadly, with the time of year inviting an examination of the intersection of economics, national politics, and global geopolitics.

You would be forgiven if, as a starting point, you expected these three areas to be in alignment. They are deeply interconnected, which suggests self-reinforcing dynamics. But 2024 brought some unusual dispersion in this relationship that actually widened, rather than narrowed, over the course of the year.

Begin with geopolitics. In 2024, Russia secured a greater advantage in the Ukraine war than the consensus forecasts of a year ago anticipated. Similarly, the human suffering and physical destruction resulting from the Israel-Hamas war in Gaza exceeded most observers’ already-grim expectations, and spread to other countries, such as Lebanon. The apparent impunity of the strong, together with the absence of effective means of preventing dire humanitarian crises, has deepened the sense for many that the global order is fundamentally imbalanced, and lacks any enforceable guardrails.

As for domestic politics, upheaval has been the order of the day in many countries. Governments have collapsed in both France and Germany — Europe’s largest economies — leaving the European Union without political leadership. And following Donald Trump’s victory in last month’s presidential election, the United States is preparing for a political transition that is likely to bring a significant increase in the political influence of a new “counter-elite.”

Meanwhile, an “axis of convenience” — comprising China, Iran, North Korea, and Russia — is seeking to challenge the Western-dominated international order. Other recent developments — from the now-impeached South Korean president’s abrupt declaration of martial law (which was quickly reversed) to the collapse of Bashar al-Assad’s regime in Syria — have reinforced the impression that we are living at a time of exceptional geopolitical and political volatility.

The past year also brought some worrisome macroeconomic developments. Europe’s malaise has deepened, as countries grapple with low growth and large budget deficits. And China has failed to respond credibly to the clear and present danger of “Japanification,” with unfavorable demographics, a debt overhang, and a prolonged property-market downturn undermining growth, economic efficiency, and consumer confidence....

....MUCH MORE

"Beijing unveils plans to boost driverless vehicle use in capital"

From Reuters, December 31:

China's capital Beijing passed new regulations on Tuesday to encourage autonomous driving technology in the city, with authorities planning to eventually allow driverless public buses and taxis.

Autonomous vehicles that pass road testing and safety assessments will be allowed to apply for road trials, the state-backed Beijing Daily newspaper reported, which said the new regulations take effect from April 1.

 

The city supports the use of autonomous vehicles for private cars, urban buses, trams and taxis, it said, adding that it wants to encourage the construction of intelligent road infrastructure to support such transport.

In a separate notice published on Monday, the central Chinese city of Wuhan also said it had approved regulations to promote the development of intelligent connected vehicles.

 

Chinese authorities have been aggressively greenlighting trials for self-driving technology with at least 19 cities conducting robotaxi and robobus tests, Reuters reported in August.

 

Companies with large robotaxi fleets in use in China include Apollo Go, a subsidiary of technology giant Baidu, which plans to deploy 1,000 robotaxis in Wuhan by end-2024....

....MORE

 

For folks who don't obsess about this stuff and read every bit and byte, a reminder that Baidu is Tesla's partner in Chinese robotaxis. If interested see some of the links in December 8's "There May Be Something To This Robotaxi Stuff: Uber And Lyft Got Spanked On Waymo Opening Florida Market (GOOG; UBER; LYFT; TSLA)"

 

AgriFoodTech: Highs and Lows - 2024

Two from AgFunderNews:

December 30:

2024 was ‘a year of reckoning for agtech’

As more than one person interviewed for this article noted, 2024 was something of a year of reckoning for agtech.

That was certainly true of agtech funding, which has staggered along for the last couple years as generalist investors leave the sector and a capital crunch continues. Some even believe we’re on the path to new financing models for agtech, particularly as the venture capital approach may not always be the best fit for the industry.

Arguably more important than money is the need to build further trust with farmers — trust about the efficacy of products and about solving problems they actually have. Even more crucial is making the economic returns of investing in agtech a reality for these growers, no matter where they are in the world.

The following roundup delves into a few areas of agtech that saw notable developments this year; it is not meant to be exhaustive. As always, drop us a line with your own thoughts on the last 12 months in agtech.
****
Regenerative ag: financing the transition
The question of how to finance the transition to regenerative agriculture was prominent in 2024. Specialty shops like Mad Capital in the US and HeavyFinance in Europe grew in prominence as ways for farmers to hopefully get access to better financing and technical assistance for transitioning....
****
Ag biologicals: past the peak of inflated expectations?
The ag biologicals sector, which includes biocontrols to protect crops and biostimulants to enhance growth/productivity, saw numerous developments this year, scientific and otherwise.

New advances in gene sequencing have advanced products in many cases. Meanwhile, new encapsulation technologies from companies like Agrospheres have gone far in solving the many delivery challenges for ag biologicals.

All the major agrochemical companies, including Bayer, Corteva, Syngenta and BASF, now have departments dedicated to biologicals, and have collectively made many acquisitions in the space over the last decade. And as the Mixing Bowl’s well-known market map shows, the industry isn’t wanting for startup activity.....
****
Indoor agriculture: ‘another year of reckoning’

In many ways, 2024 was the year of the strawberry for vertical farming.

The sector’s most widely publicized success story of the year was Oishii, which kicked off 2024 with a $134 million Series B round for its vertical farming operation that grows ultra-premium strawberries. The US-based firm closed the Series B at $150 million later in the year. Beyond fundraising (which anyone in vertical farming could tell you isn’t a reliable measure of longevity), Oishii also expanded into more grocery stores across the US, opened a solar-powered production facility, prepped for international expansion, and even released its own strawberry-inspired body wash.....

....MUCH MORE

And December 25:

5 ridiculous agrifood stories from 2024

Schumpeter's opening words are apocalyptic: "Can capitalism survive? No. I do not think it can."

A repost from 2021, the memory of which was triggered by November 30's "Will AI Generate a New Schumpeterian Growth Wave?".

 From Mises.org:

*****

....Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest. (pp. 159–160)

Therefore, capitalism, by providing a previously unknown standard of living — unobtainable through other forms of social organization — actually undermines its own support, essentially by performing its tasks too well, so that the origin of prosperity is overlooked by its greatest beneficiaries.

This brings us to another of Schumpeter's pathbreaking contributions to understanding capitalism: his work on the "Sociology of the Intellectual." As mentioned above, eroding social protections of capitalism and feelings of grievance against the system itself provide the basis for an assault on the capitalist system. All that remains is that "there be groups to whose interest it is to work up and organize resentment, to nurse it, to voice it, and to lead it" (p. 160). The intellectual class provides this driving force.

The intellectuals watch the economic process from the sidelines; by definition, they essentially have no direct experience in economic affairs. However, they wield decisive power in influencing public opinion, and their bias is strongly anticapitalist. They represent a very real threat to the capitalist system.....

*****

....Capitalism provides the means the intellectuals require to attack it: innovations that make disseminating opinion both possible and extremely inexpensive; education delivered to enough of the population to provide an audience big enough to influence lasting social changes; and perhaps most important, capitalism encourages the principle of freedom of expression which is necessary for public criticism of social institutions (pp. 155–179).

Schumpeter's insights into the sociological and psychological characteristics of the intellectual class are breathtaking:

The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work.… All those who are unemployed or unsatisfactorily employed or unsatisfactorily unemployable drift into the vocations in which standards are least definite or in which aptitudes and acquirements of a different order count. They swell the host of intellectuals … whose numbers increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment. And it often rationalizes itself into … social criticism … [and] moral disapproval of the capitalist order. (pp. 173–175)

Thus the intellectual opposition is built and supplied with weapons by the very system that it opposes. Through no fault of its own, the capitalist system is attacked by those whose very occupations are made possible by the efforts of the entrepreneurs and capitalists who drive the economy in a ceaseless process of innovation and improvement.....

https://mises.org/library/can-capitalism-survive

We'll be back next week with more Schumpeter, some Turchin and a special guest.

Schumpeter was definitely an interesting person:

May 2013 - Why Can't More Economists Be Like This?

From Economic Policy Journal:

The Most Fascinating Thing I Have Read This Week

...is about the economist Joseph Schumpeter and written by Wolfgang F. Stopler in his book, Joseph Alois Schumpeter: The Public Life of a Private Man:

Schumpeter always took his teaching seriously. His Czernovitz students--unlike his Graz students--adored him--as well they might since he fought a duel with a librarian to gain them better access to books.

Thomas McGaw fills in some of the details:

 Schumpeter had given out heavy assignments, the librarian had refused to allow the students to check out the assigned books, and when Schumpeter threw a tantrum (he was only 26, and had just started teaching), the librarian challenged him to a duel. Schumpeter won the duel by cutting a small slice out of the librarian's shoulder. The two men later became good friends, and the students got access to the books.

October 2012 - "Schumpeter on the Effects of College on the Willingness to Do Manual Labor"

September 2018 -  "Schumpeterian Profits and the Alchemist Fallacy"

July 2019  -  Schumpeter predicted that the success of corporate power itself would lead to the demise of entrepreneurial markets

AQR Capital: "Asness’ AI Twin Heralds End of Human Fund Managers"

Our readers may recall Bridgewater building an algorithmic Ray Dalio brain. If not, links after the jump.*

The writer, Aaron Brown is a former head of financial market research at AQR Capital Management.

From Bloomberg Opinion, December 6:

The AQR Capital co-founder says artificial intelligence is coming for his job.

Hedge fund executive Cliff Asness says artificial intelligence is becoming “annoyingly better” at doing parts of his job. AI deployed by his firm AQR Capital Management, where I worked for a decade, is combining investment factors to build market-beating portfolios, something that used to be Asness’ specialty. “AI’s coming for me now,” he told Bloomberg Television in a recent interview.

Almost exactly seven years ago, Asness had expressed skepticism to the Financial Times, saying that big data and machine learning were dangerous because they found too many spurious patterns, and even genuine patterns were quickly competed away in the markets. However, like a good portfolio manager, he hedged his bets, saying, “We’re feeling our way. If our first few experiments bear fruit, we’ll do more of them. If we find out we’re good at this, it will become a bigger part of AQR.”

Going back a further seven years to 2010, I recall the early enthusiasm for AI in quantitative investing. Breakthroughs in AI algorithms and improvements in computer processing caused a gold rush mentality among many investment managers, and quants seemed well positioned to be the first to the motherlode as they had the training and skills to understand and apply AI. But initial results were disappointing — not terrible, just not the kind of improvements that technophiles and science fiction fans had hoped for.

But the last seven years — conventionally dated to the 2017 publication of “Attention Is All You Need” by Alphabet Inc. researchers — have changed the picture dramatically, and the dream of fully self-driving portfolios seems within reach.

There are three main steps in quant investing: identifying factors such as value and momentum that predict future returns; combining signals from those factors into optimal portfolios; and executing trades to keep the actual portfolio optimally close to the optimal one. From 2010 to 2017, AI proved unsatisfactory at identifying factors or combining signals. It was helpful at trading, but with the sort of improvements we got from standard methods, not a quantum leap.

In the last seven years, from 2017 to 2024, as Asness said, AI has finally begun to pay off in factor identification and portfolio construction. But that’s not the big story. The most exciting advance on the horizon, the one that might finally realize the science fiction dream, is AI researchers have figured out how different types of AI systems can communicate. The synergy from combining three different AI systems should be much greater than the individual advantages in each step.

For example, the trading AI should be sending news about soft prices or erratic volumes in securities back to the factor-identification and portfolio-construction AIs, which in turn should be sending insights to each other and the trading AI. This was one of the key advantages of old-style hedge fund managers who did their own research, portfolio construction and trading. But in large quant hedge funds today, those tasks are done by different specialists.

We’re not quite at the point of breaking the curse of the Tower of Babel. Although different types of AI systems can communicate, it’s still more of a pidgin sign language than a fluent and precise exchange of information.

And even the best AI systems cannot rid themselves of occasional gross errors — the kind no human would make — and even one of these can destroy the effectiveness of the entire process. That’s why we still have humans examining the output of each AI system before feeding it as input to the downstream system (so from the factor-identification to the portfolio-management system) and why upstream communication (from the trading system, say, to the factor-identification system) is restricted or forbidden.

But these problems now seem solvable with some algorithm tuning and more computer power, issues for workaday quants rather than anything requiring breakthroughs by geniuses.

In addition to the three steps above for the core investment process, in 2010 we hoped for three indirect aids: AI coding, monitoring and explaining. Coding was the first home-run success of AI in quant finance; no one has to code anymore, AI does it much better, faster and cheaper. But we had no success at monitoring tasks — such as having the AI issue alerts that some factor was not behaving as expected, or some data looked fishy; and none at explaining events — for example, why some price relation in the market had broken down. I’m seeing progress in these areas as well, although slower than in core quant investing.

If all this works, we may see the end of the investment management business as we know it. Instead, each person could have a personal AI that combined personal information — tax situation, financial goals, income prospects — with superior market knowledge, and that never slept or had its attention wander. These AIs could trade with each other with no need for human intervention....

....MUCH MORE

*And Ray? 

• Bridgewater, World’s Largest Hedge Fund, Is Building An Algorithmic Model Of Ray Dalio's Brain
• Frederick Taylor and Ray Dalio's Brain: "Working for an Algorithm Might Be an Improvement"
• Bridgewater's Ray Dalio Really Didn't Like The Wall Street Journal Story on His Brain (he's also against fake news)

Somewhat related to Asness' twin, December 29's "The New AI Stock Pickers Are Destined to Disappoint"

"Human thought crawls at 10 bits per second, Caltech study finds"

Huh. That would explain a few things.

From Techspot, December 24:

They also explain why we can only think one thought at a time

What just happened? Scientists have discovered that our brains process thoughts much more slowly than previously believed. This surprising finding has its roots in our evolutionary history and sheds more light on why our minds work the way they do.

Researchers at the California Institute of Technology have unveiled a startling revelation about the human mind: our thoughts move at a mere 10 bits per second, a rate that pales in comparison to the staggering billion bits per second at which our sensory systems gather environmental data. This discovery, published in the journal Neuron, is challenging long-held assumptions about human cognition.

The research, conducted in the laboratory of Markus Meister, the Anne P. and Benjamin F. Biaggini Professor of Biological Sciences at Caltech, and spearheaded by graduate student Jieyu Zheng, applied information theory techniques on an extensive collection of scientific literature. By analyzing human behaviors such as reading, writing, video gaming, and Rubik's Cube solving, the team calculated the 10 bits per second figure – a rate that Meister describes as "extremely low."

To put this in perspective, a typical Wi-Fi connection processes about 50 million bits per second, making our thought processes seem glacial by comparison. This stark contrast raises a paradox that Meister and his team are eager to explore further: "What is the brain doing to filter all of this information?"

The human brain contains over 85 billion neurons, with one-third dedicated to high-level thinking in the cortex. Individual neurons are capable of transmitting more than 10 bits per second, yet our overall thought process operates at a much slower rate. This discrepancy presents another conundrum for neuroscientists to unravel....

....MUCH MORE

"U.S. Announces $5.9 Billion In Aid To Ukraine As Biden Term Nears End "

From Radio Free Europe/Radio Liberty's Ukrainian Service, December 30:

The United States announced $5.9 billion in a three-pronged aid package to Ukraine on December 30 as the White House ramps up support to the war-torn country before President Joe Biden's term ends next month.

The White House said in a statement on December 30 that the pledge includes an additional $1.25 billion drawdown package for the Ukrainian military and a $1.22 billion Ukraine Security Assistance Initiative package.

Hours later, the treasury announced a separate $3.4 billion disbursement to Ukraine in direct budget support.

"I've directed my Administration to continue surging as much assistance to Ukraine as quickly as possible -- including drawing down older U.S. equipment for Ukraine, rapidly delivering it to the battlefield, and then revitalizing the U.S. defense industrial base to modernize and replenish our stockpiles with new weapons," Biden said in the White House statement.

Treasury Secretary Janet Yellen added in a separate statement: "Our direct budget support to Ukraine arrives at a critical time as Russia intensifies its attacks on Ukrainian civilians and critical infrastructure."

"Economic assistance from the United States and our allies is crucial for Ukraine’s ability to defend its sovereignty and achieve a just peace by maintaining the critical government services that underpin its brave fight," she said in the statement.

The pledges come after Ukrainian President Volodymyr Zelenskiy said Washington was set to announce an "important decision" on support for his war-torn country's armed forces....

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"That time the US President, an expert in nuclear physics, heroically lowered himself into the reactor and saved Ottawa, Canada’s capital?"

Via University of Ottawa physicist, Jeff Lundeen:

Do you remember the world’s very first nuclear meltdown? That time the US President, an expert in nuclear physics, heroically lowered himself into the reactor and saved Ottawa, Canada’s capital?

Sounds like schlocky action movie, but it actually happened! pic.twitter.com/LtAQYC79QZ

— Jeff Lundeen (@LundeenOttawa) December 15, 2021

THREAD

Disclaimers THREAD

THREADREADER

Originally posted  December 19, 2021 with a bit more material.

"Rising Treasury yields are the biggest challenge to this bull market. Here are the ‘trigger levels’ to watch."

8%.

If you see 8% on the 10-year note you'll know it's all over and time to tell your family you love them as you brush up on your woefully inadequate hunting and foraging skills.

From MarketWatch, December 30:

Investors hoping for a Santa Rally have so far been disappointed. Stock index futures indicate Wall Street will struggle to recover Monday following a 1.1% dip for the S&P 500 at the end of last week.

One cause for the caution is rising bond yields. The benchmark 10-year Treasury yield closed Friday at its highest level in seven months, having jumped nearly a full percentage point since September despite the Federal Reserve cutting its benchmark interest rate. Concerns that President-elect Donald Trump’s tariff and tax-cut policies may exacerbate inflation, while a burgeoning government deficit increases bond supply, have put downward pressure on bond prices.

This may continue to be a problenm for equities in coming months, according to a team of Evercore ISI strategists led by Julian Emanuel. “Long term, earnings drive stocks; however, there are times when rising long term yields can exert medium-term pressure on equities even as the backdrop remains favorable,” says Emanuel in a note published Sunday.

Evercore ISI

And he continues: “As 2025 begins, rising long end bond yields pose the biggest challenge to the bull market. Indeed, the latest surge in the 10-year yield helped spur a bout of equity market volatility after 12/18’s Federal Open Market Committee [meeting].”

There are many reasons why benchmark yields may pull back a bit in coming days after their strong surge higher, Emanuel reckons, including elevated Treasury short positions being exited, and the potential for an easing of geopolitical tensions in oil-sensitive areas, which would trim inflation concerns.

However, those aforementioned Trump policies, fiscal deficit factors, and possibly reduced buying of Treasuries by China and Japan, will pressure yields higher in the medium term, so that rising bond and equity market volatility are Emanuel’s base case for the start of the year.

And the important thing to remember is that “yield pressure is agnostic to stock prices, occurring when valuations are not extended (2018) and when they are (1994, 2022),” he says....

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Keeping in mind that tariff induced inflation should be a one-off and thus transitory, the place to focus is whether or not the central bank plays ball with the Administration and resumes buying Treasury issuance or if they let rates rise as more and more paper floods the market leading to a Havensteinian hellscape made more sinister, and perhaps more protracted, by the lights of perverted science... [hmmm, don't know why Churchill popped in for a visit there at the end of the para.]

Anyhoo, the good news is: bonds have strengthened a bit this morning with the yield on the 10-year declining from Friday's 4.6190% to  4.588% last I saw.

Previously:

October 21 - "Treasury 10-Year Yields May Hit 5% in Six Months, T. Rowe Says"

December 18 - "T. Rowe Price Warns Treasury Yields Could Hit 6%"

"Singapore Money Laundering Suspects Spent Lavishly on Dubai Real Estate" (plus "Dubai Unlocked")

Is Singapore getting more corrupt or are instances of crime and sharp dealing just getting more attention?

An exclusive from the Organized Crime and Corruption Reporting Project, December 19:

Suspected members of a massive Singapore money laundering syndicate snapped up almost $30 million in Dubai properties, leaked data shows. 

Singaporean authorities have announced 17 new suspects in their sprawling investigation of a money laundering network, which cleaned billions reaped from illegal gambling and cyberfraud. 

Leaked data shows that three of those suspects bought properties worth at least $28 million in Dubai, which has become a magnet for dirty money from around the world.

Courts in Singapore have already convicted 10 members of the money laundering syndicate. They were arrested in August 2023, when more than 400 officers swept in on multiple locations throughout the Southeast Asian island state. 

Prosecutors said shortly afterwards that they had seized $1.32 billion in cash, cryptocurrencies, and assets including luxury properties and jewelry.

OCCRP previously reported that some of those convicted in the case had bought up almost $60-million-worth of properties in London, as well as real estate totalling about $30 million in Dubai. 

Now, Dubai property data obtained by OCCRP reveals even more investments by suspected members of the money laundering ring: Wang Bingang, Chen Zhiqiang, and Ke Wendi. 

All three are Chinese, but like most convicted members of the Singapore money laundering ring, Chen Zhiqiang and Ke Wendi acquired Cambodian citizenship.

The leaked Dubai data shows that the suspects purchased at least 22 properties worth a combined $28 million at current exchange rates. Most of the transactions took place between 2021 and 2023, when the Singapore-based money laundering ring was active....

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Unrelated but noteworthy at The Edge, Singapore:

SingPost moving ahead with divestment of non-core businesses and assets despite recent firing of three top executives

The Shanghai-Shenzhen CSI 300 Stock Index Looks Manipulated

The CSI 300 Index is up ten points today.

From TradingView:

Though how one would manipulate an index that broadly based, with so many megacap components, I don't know. It would be a challenge.

It's not like buying futures on the 20-component XMI on October 20, 1987, forcing the futures market makers to hedge their exposure by buying equities, and thus saving the entire financial system and possibly Western civilization. No, it's not as easy as that so how is the CSI 300 being levitated?

"The New AI Stock Pickers Are Destined to Disappoint"

Again, chatbots are not the be-all and end-all of AI development. Far from it. Machine-learning/AI programs that can tease-out connections humans don't see have been around for over a decade. Even the people who train the machines don't know exactly what they are doing and the effect can disappear at any moment.

On top of that nebulousness the edge you gain is small which means that if you have found a positive expectation game you also need a bankroll large enough to weather a string of losses longer than you might have imagined possible using a puny human frame of reference.

But if you are sure you have a positive expectation of winning and a bankroll that can handle the drawdowns, your heirs and begats-unto-the-nth-generation should end up owning all the wealth in the solar system, if not the universe.*

From Bloomberg Opinion, December 18:

Bots may invent better ways to beat the market, but they won’t necessarily benefit investors.

Meet the new stock pickers. They will remind you of the old stock pickers.

One thing to watch for next year is AI-driven investment products. There’s a lot of buzz around Wall Street about artificial intelligence taking over from real-life fund managers, presumably because AI will be better at picking stocks.

It can’t do worse. Twice a year, S&P Global Inc.’s Spiva scorecard shows that most active managers unfailingly lose to a broad stock market index over most time periods. S&P’s report doesn’t extend to hedge funds, but they haven’t fared any better.

Enter AI with hopes of doing what mortal managers can’t. Don’t hold your breath. For starters, in aggregate, stock pickers end up with the market return minus fees, as the late Vanguard Group Inc. founder John Bogle often reminded investors. That applies to humans as well as bots. So, as a group, the bots are destined to lose.

Sure, some will beat the market, but many won’t win by a big enough margin to overcome their fees. The experience of real-life stock pickers is instructive. I counted more than 7,000 actively managed stock mutual funds for which Morningstar calculated risk-adjusted returns relative to the market over the past 10 years. Roughly 45% of them won before fees, but only 27% won after accounting for cost.

Another challenge for AI is competition from other bots. The truth is that human stock pickers are already obsolete. There are numerous low-cost exchange-traded funds that replicate traditional stock-picking strategies, such as value, quality and momentum, often following a rules-based, quantitative approach mostly run by computers. Like human managers, they don’t always beat the market, but the low-cost ones have a much better shot....

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*If interested see some of the links in 2017's "We Might Be Getting Closer To Understanding How True 'Black Box' AI Makes Decisions", which includes this insight:

...One of the spookiest features of black box artificial intelligence is that, when it is working correctly, the AI is making connections and casting probabilities that are difficult-to-impossible for human beings to intuit.
Try explaining that to your outside investors.

You start to sound, to their ears anyway, like a loony who is saying "Etaoin shrdlu, give me your money, gizzlefab, blythfornik, trust me."...

You have to be shading the odds in your favor and be a world-class communicator to successfully solicit outside money with the 'ol gizzlefab, blythfornik pitch. But I have seen it happen.

"The incredible true story of a CIA plane crash in Death Valley National Park"

From SFgate, December 15:

The plane was part of a 'super-secret operation'

On a cold, dark night in January 1952, a distress call went out over Death Valley.

“Mayday. Mayday. Mayday. This is Air Force 001 bailing out north of Barstow, California,” an official crash report would later read. Seconds later, six men jumped out of a 16-ton, two-engine, SA-16 Albatross plane into total darkness. The plane — with its backdoor hanging open — continued unmanned for a few moments, eventually crashing into a nearby desert mountain.

More than 70 years later, the metallic carcass is still there.

“The whole setting for it is just bizarre in a post-apocalyptic way,” said Abby Wines, spokesperson for Death Valley National Park. “It’s kind of on its side on a slope. It’s extremely steep. You’re on the ridge that sticks out into Panamint Valley. When you’re looking through and over the plane, there’s this desolate, open space where there’s nothing but the valley and mountains as far as the eye can see.”

But the site, which can still be accessed by very experienced hikers, is just the start. The real story is why the Air Force was flying over Death Valley in the first place: a fantastical tale that involves the most secret corners of the federal government, classified nighttime training flights and Cold War anti-communist agents.

A jump into darkness

If not for the crash, we would know very little, if anything at all, about the formation of the 580th, 581st and 582nd Air Resupply and Communications Wings, also known as ARC Wings.

The project was a joint effort between the Air Force and the CIA, part of a “super-secret operation few people knew about in 1952,” according to an article titled “The CIA’s Death Valley Albatross,” which ran in Air Classics magazine in April 1979.

“The CIA was just flying over the park,” said Kimberly Selinske, Death Valley historian. “It wasn’t like they were using the park. They just happened to crash.”

When SFGATE first called Selinske about the Albatross, she was only vaguely familiar with it. But as Death Valley’s first official historian, a trip to the archives yielded scattered papers, an article and one official narrative compiled in the 1970s.....

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Aimo Koivunen, The Finnish Soldier Who Survived World War II Thanks To Methamphetamine

With the April 2023 accession of Finland to NATO and recent maritime activities in the Baltic this post came to mind.

Originally posted April 15, 2022.

From All Things Interesting:

Meet Aimo Koivunen, The Soldier Who Survived WWII Thanks To Accidentally Overdosing On Meth

In 1944, Finnish soldier Aimo Koivunen got separated from his unit and survived for weeks inside the Arctic Circle without food or shelter — fueled by a dose of meth large enough for 30 men.

Over the course of World War II, Finland staved off a Soviet invasion, allied with Germany to invade the Soviet Union, and then fought with the Allies against Germany. And soldier Aimo Koivunen’s meth-fueled survival story breathtakingly embodies that chaos.

While fleeing a Soviet ambush, Koivunen took a near-lethal overdose of methamphetamine. The drugs helped Koivunen cover hundreds of miles of ground – but they nearly killed him in the process.

Aimo Koivunen’s Fateful Ski Patrol

Heavy snow covered the ground in Lapland on March 18, 1944. Finnish soldiers had been fighting for their country for over four years of nearly uninterrupted war. Deep behind enemy lines, one Finnish ski patrol found itself surrounded by Soviets.

Gunfire broke the silence. Men scrambled for safety. The ambush turned into a race for survival as the Finnish troops fled on skis.

Aimo Koivunen led the Finnish skiers through deep, untouched snow. Koivunen’s fellow soldiers relied on him to cut the tracks for the rest of the troops to glide across. The grueling work quickly drained Koivunen — until he remembered the package of pills in his pocket....

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"Look sarge, I can ski backwards. On my hands. Up a 60° grade. In my underwear."

Possibly related December 4: 

"Barbarian warriors in Roman times used stimulants in battle, findings suggest"

"How the U.S. Lost Control of Bird Flu, Setting the Stage for Another Pandemic"

Now that SciAm has a new editor we may begin linking to them again. Under the old regime the magazine had become so "science-like" rather than scientific that is was worse than useless.

From Scientific American, December 20:

As the bird flu virus moved into cows and people, sluggish federal action, deference to industry and neglect for worker safety put the country at risk

Keith Poulsen’s jaw dropped when farmers showed him images on their cellphones at the World Dairy Expo in Wisconsin in October. A livestock veterinarian at the University of Wisconsin, Poulsen had seen sick cows before, with their noses dripping and udders slack.

But the scale of the farmers’ efforts to treat the sick cows stunned him. They showed videos of systems they built to hydrate hundreds of cattle at once. In 14-hour shifts, dairy workers pumped gallons of electrolyte-rich fluids into ailing cows through metal tubes inserted into the esophagus.

“It was like watching a field hospital on an active battlefront treating hundreds of wounded soldiers,” he said.

Nearly a year into the first outbreak of the bird flu among cattle, the virus shows no sign of slowing. The U.S. government failed to eliminate the virus on dairy farms when it was confined to a handful of states, by quickly identifying infected cows and taking measures to keep their infections from spreading. Now at least 860 herds across 16 states have tested positive.

Experts say they have lost faith in the government’s ability to contain the outbreak.

“We are in a terrible situation and going into a worse situation," said Angela Rasmussen, a virologist at the University of Saskatchewan in Canada. “I don’t know if the bird flu will become a pandemic, but if it does, we are screwed.”

To understand how the bird flu got out of hand, KFF Health News interviewed nearly 70 government officials, farmers and farmworkers, and researchers with expertise in virology, pandemics, veterinary medicine, and more.

Together with emails obtained from local health departments through public records requests, this investigation revealed key problems, including deference to the farm industry, eroded public health budgets, neglect for the safety of agriculture workers, and the sluggish pace of federal interventions.

Case in point: The U.S. Department of Agriculture this month announced a federal order to test milk nationwide. Researchers welcomed the news but said it should have happened months ago — before the virus was so entrenched.

“It’s disheartening to see so many of the same failures that emerged during the COVID-19 crisis reemerge,” said Tom Bollyky, director of the Global Health Program at the Council on Foreign Relations.

Far more bird flu damage is inevitable, but the extent of it will be left to the Trump administration and Mother Nature. Already, the USDA has funneled more than $1.7 billion into tamping down the bird flu on poultry farms since 2022, which includes reimbursing farmers who’ve had to cull their flocks, and more than $430 million into combating the bird flu on dairy farms. In coming years, the bird flu may cost billions of dollars more in expenses and losses. Dairy industry experts say the virus kills roughly 2% to 5% of infected dairy cows and reduces a herd’s milk production by about 20%.

Worse, the outbreak poses the threat of a pandemic. More than 60 people in the U.S. have been infected, mainly by cows or poultry, but cases could skyrocket if the virus evolves to spread efficiently from person to person. And the recent news of a person critically ill in Louisiana with bird flu shows that the virus can be dangerous.

Just a few mutations could allow the bird flu to spread between people. Because viruses mutate within human and animal bodies, each infection is like a pull of a slot machine lever.

“Even if there’s only a 5% chance of a bird flu pandemic happening, we’re talking about a pandemic that probably looks like 2020 or worse,” said Tom Peacock, a bird flu researcher at the Pirbright Institute in the United Kingdom, referring to COVID. “The U.S. knows the risk but hasn’t done anything to slow this down,” he added....

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When Will Elon Musk's Boring Company Begin Work On The Trans-Atlantic Tunnel?

From dezeen, December 18:

Elon Musk claims Boring Company could build transatlantic tunnel for around $20 billion

Tech mogul Elon Musk has claimed that The Boring Company could create a transatlantic tunnel between New York and London for 1,000 times less money than previously estimated.

Musk made the claim in response to a post on the social media platform X, which he owns, by news platform Daily Loud that contained a rendering of a the tunnel with the headline: "Proposed $20 Trillion tunnel would get you from New York to London in 54 minutes."

In response Musk said: "The @boringcompany could do it for 1000X less money."

Elon Musk claimed he could create the transatlantic tunnel for around $20 billion

This estimation would put the price of the transatlantic tunnel at around $20 billion (£15.7 billion).

Daily Loud was referencing a figure that has recently appeared in multiple news outlets including Newsweek and CNN, although no scientific or engineering source was cited.

Tunnel would be world's longest by over 3,000 miles

According to Forbes, in the early 2000s American researchers at MIT Ernst Frankel and Frank Davidson proposed a maglev vacuum train line that would cross the 3,500-mile distance between the metropolises and allow for speeds of up to 1,200 miles per hour....

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Additionally he's working on an AI search engine.

Also at dezeen:

Louis Vuitton flagship store disguised as stack of luggage trunks

"How A.I. Could Reshape the Economic Geography of America"

From the New York Times, December 26:

As the technology is widely adopted, some once-struggling midsize cities in the Midwest, Mid-Atlantic and South may benefit, new research predicts.

Chattanooga, Tenn., a midsize Southern city, is on no one’s list of artificial intelligence hot spots.

But as the technology’s use moves beyond a few big city hubs and is more widely adopted across the economy, Chattanooga and other once-struggling cities in the Midwest, Mid-Atlantic and South are poised to be among the unlikely winners, a recent study found.

The shared attributes of these metropolitan areas include an educated work force, affordable housing and workers who are mostly in occupations and industries less likely to be replaced or disrupted by A.I., according to the study by two labor economists, Scott Abrahams, an assistant professor at Louisiana State University, and Frank Levy, a professor emeritus at the Massachusetts Institute of Technology. These cities are well positioned to use A.I. to become more productive, helping to draw more people to those areas.

The study is part of a growing body of research pointing to the potential for chatbot-style artificial intelligence to fuel a reshaping of the population and labor market map of America. A.I.’s transformative force could change the nation’s economy and politics, much like other technological revolutions.

“This is a powerful technology that will sweep through American offices with potentially very significant geographic implications,” said Mark Muro, a senior fellow at the Brookings Institution, where he studies the regional effects of technology and government policy. “We need to think about what’s coming down the pike.”

At issue is a new and rapidly growing breed of the technology known as generative A.I., which can quickly draft business reports, write software and answer questions, often with human-level skill. Already, predictions abound that generative A.I. will displace workers in call centers, software developers and business analysts.

That pattern of technology disruption has happened before. The industrial revolution mechanized agriculture, pushing workers off farms and into cities. Modern cars and roads brought the rise of the suburbs in the 1950s and 1960s. Factory automation and globalization, accelerated by the internet, destroyed jobs in traditional manufacturing centers, depopulating parts of the Midwest and South.

While uncertainty remains about how fast and how far into workplaces generative A.I. will reach, a series of studies have concluded that the impact is likely to be substantial, perhaps automating the equivalent of millions of jobs.

To date, the regions benefiting the most from the rapidly progressing technology have been a handful of metro areas where scientists are building A.I., including Silicon Valley.

But those places are also some of the ones most apt to face issues as A.I. gets better and can automate jobs, according to the labor economists’ study. Centers of technology and office work including San Jose, San Francisco, Washington, New York and Boston are home to large numbers of high-paid workers, from business analysts to computer programmers, whose tasks involve generating words or code, which is what A.I. does well.

But exposure to A.I. does not necessarily translate to sweeping job losses. These cities, the economists note, have proved to be among the most resilient, dynamic places in the country, able to withstand setbacks and recover.

In their paper, the two labor economists identified nearly two dozen metropolitan areas expected to benefit from the broader adoption of A.I. technology, including Dayton, Ohio; Scranton, Pa.; Savannah, Ga.; and Greenville, S.C.....

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Friedrich von Hayek Nobel Prize Lecture: "The Pretence of Knowledge"

From NobelPrize.org:

Given December 11, 1974

The particular occasion of this lecture, combined with the chief practical problem which economists have to face today, have made the choice of its topic almost inevitable. On the one hand the still recent establishment of the Nobel Memorial Prize in Economic Science marks a significant step in the process by which, in the opinion of the general public, economics has been conceded some of the dignity and prestige of the physical sciences. On the other hand, the economists are at this moment called upon to say how to extricate the free world from the serious threat of accelerating inflation which, it must be admitted, has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences – an attempt which in our field may lead to outright error. It is an approach which has come to be described as the “scientistic” attitude – an attitude which, as I defined it some thirty years ago, “is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.”¹ I want today to begin by explaining how some of the gravest errors of recent economic policy are a direct consequence of this scientistic error.

The theory which has been guiding monetary and financial policy during the last thirty years, and which I contend is largely the product of such a mistaken conception of the proper scientific procedure, consists in the assertion that there exists a simple positive correlation between total employment and the size of the aggregate demand for goods and services; it leads to the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level. Among the various theories advanced to account for extensive unemployment, this is probably the only one in support of which strong quantitative evidence can be adduced. I nevertheless regard it as fundamentally false, and to act upon it, as we now experience, as very harmful.

This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement. This is sometimes carried to the point where it is demanded that our theories must be formulated in such terms that they refer only to measurable magnitudes.

It can hardly be denied that such a demand quite arbitrarily limits the facts which are to be admitted as possible causes of the events which occur in the real world. This view, which is often quite naively accepted as required by scientific procedure, has some rather paradoxical consequences. We know: of course, with regard to the market and similar social structures, a great many facts which we cannot measure and on which indeed we have only some very imprecise and general information. And because the effects of these facts in any particular instance cannot be confirmed by quantitative evidence, they are simply disregarded by those sworn to admit only what they regard as scientific evidence: they thereupon happily proceed on the fiction that the factors which they can measure are the only ones that are relevant.

The correlation between aggregate demand and total employment, for instance, may only be approximate, but as it is the only one on which we have quantitative data, it is accepted as the only causal connection that counts. On this standard there may thus well exist better “scientific” evidence for a false theory, which will be accepted because it is more “scientific”, than for a valid explanation, which is rejected because there is no sufficient quantitative evidence for it....

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