Daily Office:
Tuesday, 19 October 2010
¶ The man who gave us those beautiful fractals, Benoît Mandelbrot, died late last week, more or less estranged from the financial world that his researches transformed. In his opinion, quantitative analysts misused his work to convey a false sense of security about dangerous risks. Justin Fox, sitting in for Felix Salmon, suggests why Wall Street didn’t heed Mandelbrot’s warnings. (Also: Brain Pickings)
So why haven’t finance academics and practitioners paid more attention to Mandelbrot’s warnings? I think it’s mainly that he didn’t provide them a handy alternative to Black-Scholes. I can’t pretend to fully understand the practical implications of his fractal view of markets (and yes, I’ve read his book for lay readers on the subject), but it does seem more useful as a critique than as a positive model of market behavior. You can’t haul in big consulting fees or create giant new securitization markets with a critique. So the natural tendency of both scholars and bankers has been to hold on for dear life to the Black-Scholes approach to modeling market risk. They get paid well for doing so, after all.
¶ We agree with David Cho about the finale of Man Men‘s fourth season. (We also think that it befitted a drama that is more about the world of work than any show ever.) Of course, we would have been happy with anything that put an end to the tyranny showtimes. (The Awl)
The expectations that people have of the season finales of serialized television boil down to two things. We want a culmination of everything a season has worked towards, if not a resolution, and we also want something to look forward to for the next season. Some more recent successful executions of this have been: the first season of “Friends” where Ross has to choose Rachel and the Chinese girl, the first season of “Lost,” with the revelation of the hatch, and “Friday Night Lights” and its third season finale—I won’t mention what happens because it’s so good and should be watched by everyone and appreciated in its entirety.
There are the rare occasions when a neatly tied bow is enough of a conclusion to satisfy its audience, like the first three seasons of “The Wire,” for example, but those instances are few and far between. More and more, season finales have become great, grasping reaching things. (See: “True Blood.”) Everything has to blow up, or fall apart, or wildly open a new chapter.
And sure, with “Mad Men,” we had high expectations—particularly given the precedent, with the end of the previous season and the founding of Sterling Cooper Draper Pryce. That was a very traditional season finale, and a very traditionally satisfying one: there was conflict, there was stress and there was the promise of something to anticipate.
And this season finale—it was unsettling. It promised something for next season, for sure. Just maybe not something you wanted.
¶ At Naked Capitalism, Yves Smith rounds up objections to the proposed QE2, or second “quantitative easing.” This is a somewhat arcane issue, but it’s also quite important, and we hope that the entry, with its snips from commenters as eminent as Joseph Stiglitz, will shed light. Ms Smith’s conclusion:
The distressing thing about the Fed is the fact that is has come to be dominated by monetary economists. That’s a comparatively recent development. Shortly after Bernanke was appointed, I had lunch with a former Fed economist who in his next job could have taken credit for having invented swaps but refused to. He remarked drily, “The record of academic economists as Fed chiefs is poor.†Sadly, his assessment looks better by the day.
¶ Why Harrison Ford is awarding $10,000 prizes annually to writers who can make complex biodiversity issues intelligeible to the general public. (Wired Science)
Wilson: The continuity here is storytelling. Scientists are storytellers. They just don’t know how to tell a story [laughter].
The way they make discoveries and the way they piece them together, particularly when they add the evolutionary part — how it came to be, the impact of the phenomenon on the body or on the ecosystems — is fundamentally historic. The challenge very few scientists choose to undertake is how the story touches not just on the public’s desire to have a story told to them. It also touches on the archetypes.
Hollywood, for example, has mastered them. These are the mythic archetypes. I don’t how Harrison feels about this, he might even disagree, but you know, the scenes that electrify us in a really good movie include ones like the clash between good and evil. The champion who appears and, against all odds, repels the invader. The discovery of new worlds. And the death and rebirth of worlds.
These are grand themes that, in small detail or in grand epics, are what draw our attention. And scientists can tell those kinds of stories if they know how and they try. And this is one of those challenges I think we as scientists need to beat.Â
Wired.com: So you see this as the best way to incentivize good science writing?
Wilson: Yep.
Ford: What we’re about is storytelling and the alliance of storytelling and emotion. And that’s the humanism that I’m referring to. The real language of film — and the evocative language of any discipline — has an emotional component. And I think that’s part of what Ed is referring to as “grand themes.â€
But it takes a degree of perception that’s not always available to be a scientist and write emotionally and evocatively about science. That’s the idea of the prize. We’re not talking about textbooks so much as we are popular writing that will reach the general public. The public that should be responsible for how the world is working or not working.
¶ We’ve discovered a new blog (better to say that a new blog discovered us): My Dog Ate My Blog. We’re very heartened by the overlap in our interests, and the fresh writing is brisk and engaging. In a recent entry, Sarah McCarthy writes about the thorny decision in the eminent-domain case, Kelo v City of New London.Â
This decision is unusual in that, in some ways, it’s in line with the libertarian view that the federal government should let states determine what’s in their best interests. In this case, that’s precisely what the Supreme Court did: said, “OK, New London, Connecticut, you know what will stimulate economic growth for you better than we do. We’ll let you do what you think is best.†Unsurprisingly, though, the decision is universally despised by liberals, conservatives, communists, libertarians, and anyone else who’s ever either owned a home or wanted to.  Even ardent supporters of states’ rights are less enthusiastic about them when states are using those rights to bulldoze their homes.
On the other hand, particularly in light of the current financial crisis, what are the other options? People rarely voluntarily give up chunks of primo property, and struggling cities do need some means to stimulate their economies. Homeowners ultimately benefit when the cities that their homes are economically healthy. The entire highway U.S highway system wouldn’t have been possible without the government having seized private property. Is this a situation where the end justifies the means?
This issue is difficult to resolve because it takes two things that are critically important to Americans and demands that we choose between the two. The right to own your own home, to be master of your castle, is perhaps the most central part of the American dream–the housing crisis came about because people pursued that dream even when it wasn’t financially viable for them. Since the country’s founding, though, growth and expansion of markets is what Americans do. Keeping small towns from becoming abandoned ghost towns is another worthy goal–when there’s no large city nearby to provide employment, bringing businesses to a town can mean the difference between its life and death.
¶ Parag Khanna never mentions Jane Jacobs in a post at Foreign Policy that might as well entitled “Cities and the Wealth of Nations,” — it’s called “Beyond City Limits” insteaad — but what’s somewhat more troubling is the non-appearance of military considerations. With the exception of Venice (which established a large hinterland on both sides of the Adriatic, city states have rarely mastered the defense problem, and never for very long. Toward the end, the focus shifts somewhat, via a discussion of the gee-whiz Korean urban project at Songdo: cities are indeed our laboratories for the future. (via BLDBLOG)
Indeed, Songdo might well be the most prominent signal that we can — and perhaps must — alter the design of life. Cities are where we are most actively experimenting with efforts to save the planet from ourselves. Former U.S. President Bill Clinton has brought together mayors from 40 large cities to build a network of best practices for reducing greenhouse gas emissions. Vertical farming, long in vogue in Tokyo, is spreading to New York; the electric mass-transit system of Curitiba in Brazil is being copied in North America; Cisco is embedding sensors in Madrid’s traffic signals to make the city traffic-free. The consulting firm McKinsey recently estimated that if India pursues urbanization in an ecoefficient manner, it will not only make the country a healthier place, but add an estimated 1 to 1.5 percentage points to its GDP growth rate.
In this way, a world of cities can spark a cycle of virtuous competition. As geographer Jared Diamond has explained, Europe’s centuries of fragmentation meant that its many cities competed to gain an edge in innovation — and today they share those advances, making Europe the most technologically developed transnational zone on the planet.
What happens in our cities, simply put, matters more than what happens anywhere else. Cities are the world’s experimental laboratories and thus a metaphor for an uncertain age. They are both the cancer and the foundation of our networked world, both virus and antibody. From climate change to poverty and inequality, cities are the problem — and the solution. Getting cities right might mean the difference between a bright future filled with HafenCitys and Songdos — and a world that looks more like the darkest corners of Karachi and Mumbai.
¶ At HTMLGiant, Roxanne Gay announces something new: a Literary Magazine Club. Every month will feature a different “little magazine,” starting with one that we’ve never heard of, New York Tyrant. (That would be the Editor, surely.) We’ve ordered a copy!
I love literary magazines. I love reading them, in print or online. I love editing. I love having my work published in magazines. Literary magazines feel like a neverending conversation between writers and readers and each day, I wake up excited, knowing I get to participate, in some small way, in that conversation. When I read a magazine like Everyday Genius, which surprises me, well, every day, I start to think that when people say publishing is dying, they don’t understand the meaning of death. I enjoy Annalemma in print or online, and sometimes, the writing simply takes my breath away. I read an issue of Ninth Letter, which is always gorgeously designed and edited, and I think about how I’m living in the right time to be able to read such a fine product. Last week, Blake asked what we thought the top five online magazines were, in terms of content, prestige, and design. I answered, but it was very difficult to stop at just five. So many magazines, both in print and online, are produced and edited so well that it is difficult to think of a magazine I don’t like. Certainly, there are those magazines where there’s no design, or a generic template is used, or I don’t quite understand some of the content choices, but even then, you can find surprisingly good writing, or, if you’ll forgive the cliché, diamonds in the rough. Publishing may be dying, but there are countless writers and editors who have not been notified of this untimely end coming to pass. The plethora of literary magazines actively contributing to the literary conversation are ample evidence, for me, that we have not lost the battle to other forms of entertainment. We’re very much in the fight.
¶ Also sitting in for Felix Salmon, Barbara Kiviat picks up a hot topic that was raised in the Times over the weekend: the renewed willingness of economists to take cultural considerations into account when talking about poverty. Such talk makes her uncomfortable, as indeed it does us. If there’s a connection, it’s mediated by other factors, ranging from education to public transport, all of which can be more or less subsidized without affecting individual income.
I’m all for understanding the nature of poverty, but the culture lens makes me nervous. Maybe that’s because right after I read Identity Economics, I read The Trouble With Diversity, by Walter Benn Michaels, an English professor at the University of Illinois at Chicago. One of the main arguments of that book is that there is a lurking danger in turning a conversation about economics (poor people don’t have money) into a conversation about culture (poor people have different values and make different life decisions). The big risk: since Americans are loathe to judge one culture as superior to another, we will come to accept poverty as a valid alternative. You’re not poor because you can’t get a job that pays enough to cover your bills (a failure of education, the free market, etc)—you’re poor because you are part of a different culture, which, in diversity-committed America, we all have to respect.
The other thing that worries me about the culture frame is that so much rests on the categories we use to try to capture “culture.â€
¶ Paris en noir et blanc. (via Mnémoglyphes)
¶ Nailing Cockerham. (The Age of Uncertainty)