The inevitable collision between the scientific and public world

14 03 2010

Cover of the latest UNEP report

The scientific community prides itself in its ability to distinguish good from junk science thanks to a thorough and objective peer-review process. While this process has proved successful to foster scientific progress, it has been recently put to test when scientific issues became entangled with public policy debates. From the toxicity of chemicals like aspartame or tobacco in the 1980’s to the recent Climate Gate, more and more scientists get dragged into the public arena where brilliant or simply demagogic rhetoric trumps long and complex discussions about statistical significance. Scientists are ill-equipped to provide opinions when they are in reality accustomed to discuss about facts. As a result, you end in situations like Climate Change where both scientists and public leaders get frustrated at each other, leaving the door open for private and other interests to shape the debate in their favor.

A couple of months ago, MIT organized a conference with Richard Lindzen and other professors from the institution. Richard Lindzen is the A. P. Sloan Professor of Meteorology at MIT and one of the most famous voices against the climate change consensus. He is widely quoted in the conservative reports denying the existence of climate change. However, when one carefully listens to him, it becomes obvious that he does not deny the existence of man-induced climate change. He just argues that the data proving a anthropogenic climate change is not conclusive for lack of statistical significance. In a nutshell, he does not deny nor confirm climate change; he is indecise. During the same conference, Ronald Prinn, the TEPCO Professor of Atmospheric Science at MIT, strongly argued against Pr. Lindzen but finally acknowledged that the only difference between them relied on their different appreciation of the risk. Prinn summarized it well when he said: “My judgement of statistical significance for anthropogenic warming is very much dependent on my belief/fear that we don’t have another planet to go to.” Both were looking at the same data but saw different thing. Read the rest of this entry »

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The power of self-fulfilling stories in financial markets

26 02 2010

Soros, the new Citizen Kane? (Credits: mindfully.org)

On December 2009, the euro traded at $1.51. Today, it trades at $1.35. What can explain this 11% downfall in little bit more than 2 months? An avid reader of the Wall Street Journal or the Financial Times will eloquently explain that it just reflects the faster recovery of the US economy out of the crisis vs. Europe, amplified by fears that Greece may default on its sovereign debt. End of story? Not so fast. A closer look will reveal the perfect case study for the power of self-fulfilling stories in financial markets.

Deeply ingrained in our collective subconscious is the fear that we are getting manipulated by higher forces. Not so long ago, people questioned the power of mass media and how Rupert Murdoch or Silvio Berlusconi could bend reality with their editorial lines rather than reporting it. I will argue that hedge fund managers and other leading investment bankers have become the new Citizen Kane, shaping reality with powerful storytelling. Financial markets have slowly but surely built a very advanced language that now allow them to communicate and broadcast complex stories. Puts, call, credit-default swaps and other derivatives constitute the building blocks of their vocabulary. Traders have become the journalists that put those words together, following the editorial line dictated by their fund manager. The assets under management, the equivalent of circulation, provide more or less clout to the fund editorial line. Read the rest of this entry »





The predicted extinction of the Homo Economicus

19 02 2010

Source: hugsandi.is

Amongst fear of biodiversity loss, one species is slowly but surely facing extinction – the Homo Economicus. According to Wikipedia, the Homo Economicus “is the concept in some economic theories of humans as rational and broadly self-interested actors who have the ability to make judgments towards their subjectively defined ends.”

Yes, human beings are capable of rational and utilitarian thinking but this is only the tip of the iceberg. Neuroscience has made tremendous progresses on how our rational and irrational selves interact but there is still a long way to go. For a curious reader, I recommend the book “How we decide” from Jonah Lehrer. In this book, Lehrer provides plethora of scientific nitbits that will challenge your beliefs about the human brain. For instance, we are all victims of a phenomenon called “anchoring” or how your short-term memory strongly influences your most “rational” decisions. A group of economists led by Dan Ariely asked MIT students to enter an auction and bid on several random items ranging from a cordless keyboard to a bottle of wine. Before bidding for each object, students had to write down the last two digits of their Social Security Number and decide whether they were willing to pay that numerical amount for the item. Then, they were asked to place their final bid for the object. It turned out that students with a higher-ending Social Security Number made an average bid 4 times greater than the ones with a lower-ending Social Security Number. While their Social Security Number was irrelevant to bid for a cordless keyboard, their brain kept the information in their short-term memory, which anchored their next decision. Read the rest of this entry »





Limits to growth? Beware of the next Malthus

12 01 2010

Source: Wikipedia

It is the perennial question. Are we outgrowing the Earth? Since Mathus’ dark predictions, the issue of Earth carrying capacity has been on and off the public agenda. There is clearly no definite answer as people have painted convincing scenarios for both sides of the question. On the on hand, the gloomy scenario depicts an earth suffocating under a booming population requiring more and more resources to attain new standards of wealth. On the other hand, technology optimists believe that game-changing innovations will enable a wealthier larger population (e.g. nuclear fusion, climate engineering, etc.)

It is typical that issues like these quickly evolve from a scientific “consensus building approach” to a heated advocacy debate. I will come back to this in a number of posts as it is symptomatic of society where science, policy and business worlds have collided. Instead of challenging and building on a work-in-progress theory like in any scientific problem, advocates from both sides monopolize the debate and believe that the truth will emerge from the best rhetoric. The main reason for this evolution resides in the inherent complexity of the issue, which leaves a scientific approach short of closing all the critical uncertainties. As a result, you see “religions” come to light as the debate gets parceled around nays-sayers and doomsayers, between right and wrong. Read the rest of this entry »