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April 27, 2011

I wish to celebrate…

The economic and financial market turmoil has prompted me to post this. It is relevant and enlightening as it deals with the irrationality of the human mind, especially related to our economic choices. In fact, in reality, we are anything but rational beings.

The Royal Swedish Academy of Sciences decided to give the Noble Prize in Economic Sciences, in 2002 to be shared between Daniel Kahneman, Princeton University, USA and Vernon L. Smith, George Mason University, USA.

For having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty” and having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms.

Traditionally, much of economic research has relied on the assumption of a “homo Ĺ“conomicus” motivated by self-interest and capable of rational decision-making. Economics has also been widely considered a non-experimental science, relying on observation of real-world economies rather than controlled laboratory experiments. Nowadays, however, a growing body of research is devoted to modifying and testing basic economic assumptions; moreover, economic research relies increasingly on data collected in the lab rather than in the field. This research has its roots in two distinct, but currently converging, areas: the analysis of human judgment and decision-making by cognitive psychologists, and the empirical testing of predictions from economic theory by experimental economists.

Here is Vernon L. Smith speech:

I wish to celebrate

The Royal Family for their grace and charm in this magnificent affirmation of the dignity of humankind.

• Daniel Kahneman for his ingenuity in the study and understanding of human decision and its associated cognitive processes demonstrating that the logic of choice and the ecology of choice can be divergent.

• The pioneering influence of Sidney Siegel, Amos Tversky, Martin Shubik, and Charles Plott on the intellectual movement that culminated in the economics award for 2002.

• Humanity’s most significant emergent creation: Markets.

• Mandeville who said: “The worst of all the multitude did something for the common good.”

• The ancient Judeo Commandments: Thou shalt not steal or covet the possessions of thy neighbor, which provide the property right foundations for markets, and warned that petty distributional jealousy must not be allowed to destroy them. Neither shalt thou commit murder, adultery or bear false witness, which provide the foundations for cohesive social exchange.

• David Hume who declared the three laws of human nature: The right of possession, its transference by consent, and the performance of promises, and taught that the rules of morality are not the conclusions of reason.

• F.A. Hayek for teaching us that an economist who is only an economist cannot be a good economist; that fruitful social science must be very largely a study of what is not; that reason properly used recognizes its own limitations; that civilization rests on the fact that we all benefit from knowledge that we do not possess (as individuals).

• Benjamin Franklin who said “Tell me and I forget, teach me and I remember, involve me and I learn.”

• And to Kahlil Gibran who reminds us that, “work is love made visible”.

Nicely said.

April 1, 2011

Has It Really Been 800 Years?

Cambridge University, believed to have been formed in 1209 by scholars who had left Oxford after a dispute with local townspeople, developed into one of the most respected universities in the world (it’s also one of the most extensive, with a campus of 31 colleges). Through the decades, it has produced more than 80 Nobel Prize winners and nurtured some of history’s great thinkers: the list includes John Milton, Isaac Newton, Jawaharlal Nehru, Hans Blix, Ludvig Wittgenstein, Bertrand Russell, Francis Crick and James Watson (discoverers of the structure of DNA), Sylvia Plath, Ted Hughes and Stephen Hawking and… Cuthbert Lempriere Holthouse. Doubtless, you are burning to find out who Cuthbert was, and always wondered what Cuthbert Lempriere Holthouse looked like - well, he looked like this.

The object he is holding is the last ever of the original Wooden Spoons, in the sense of a mocking award for finishing last. It began as a tradition amongst the Mathematics faculty at Cambridge University, from at least 1803 until 1909, of awarding a wooden spoon to the student who graduated with the lowest passing mark. The spoons got bigger and more elaborate over time, culminating in this one, converted from a rowing blade. It was Cuthbert's devotion to the college boat that cost him greater academic success. (Were you surprised a maths student named Cuthbert turned out to be such a jock? Me too. Shame on us for our lazy preconceptions.)

The tradition ended in 1909 because 'the system was changed so that the results were announced in alphabetical order rather than by exam mark.'

Now really, if that little manoeuvre rendered an entire graduating class of Cambridge mathematicians unable to work out who had come bottom I can’t help but think wooden spoons were due all round.