AI and Geoeconomics

An extract from T. C. Schelling Economics Division, The RAND Corporation, P-1716 June 5, 1959 [Preventing deduction and anticipation in a zero-sum game] In the theory of games of pure conflict ("zero-sum" games) randomized strategies play a central role. It may be no exaggeration to say that the potentialities of randomized behavior account for most of the interest in game theory during the past decade and half (*). The essence of randomization in a two-person zero-sum game is to preclude the adversary's gaining intelligence about one's own mode of play -- to prevent his deductive anticipation of how one may make up one's own mind, and to protect oneself from tell-tale regularities of behavior that an adversary might anticipate. In the game that mix conflict with common interest, however, randomization plays no such principal role, and the role it does play is rather different. [Giving fractional/sampled information to avoid total war situations in a general game...

Decision under uncertainty with imperfect probabilistic description of reality The field of decision-making under uncertainty was pioneered in the 1950s by Dantzig [6] and Charnes and Cooper [5], who set the foundation for, respectively, stochastic programming and optimization under probabilistic constraints. While these classes of problems require very different models and solution techniques, they share the same assumption that the probability distributions of the random variables are known exactly, and despite Scarf's [10] early observation that we may have reason to suspect that the future demand will come from a distribution that differs from that governing past history in an unpredictable way," the majority of the research efforts in decision-making under uncertainty over the past decades have relied on the precise knowledge of the underlying probabilities . Even under this simplifying assumption, a number of computational issues arises, e.g., the need for multi-variate ...

Equity are still in a sweet spot of low rates and government : +3,46% for SP500 and 6,29% for Pacific Ex-Japan (ETF EPP) since last Friday. Gold (+5,87% for GLD since last Friday) is picking up as it is seen as a hedge against a potential new inflation trend fueled by reflation [1]. [1] Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes . It is the opposite of disinflation . It can refer to an economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country's output. This can possibly be achieved by methods that include reducing tax, changing the money supply, or even adjusting interest rates .

From Wikipedia, the free encyclopedia In information theory , the Shannon–Hartley theorem is an application of the noisy channel coding theorem to the archetypal case of a continuous-time analog communications channel subject to Gaussian noise . The theorem establishes Shannon's channel capacity for such a communication link, a bound on the maximum amount of error-free digital data (that is, information ) that can be transmitted with a specified bandwidth in the presence of the noise interference, under the assumption that the signal power is bounded and the Gaussian noise process is characterized by a known power or power spectral density. The law is named after Claude Shannon and Ralph Hartley . Claude Shannon 's development of information theory during World War II provided the next big step in understanding how much information could be reliably communicated through noisy channels. Building on Hartley's foundation, Shannon's noisy cha...

Similarly to the wave-particle duality, two families of forces are driving markets prices dynamics and oscillations : economical information on one side and emotional signals on the other side. To quote Robert Shiller [1]: "The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks.Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble." This is for Shiller and the behavioral finance analysts a consequence of an "informational cascade": a situation where people observe the actions of others and then make the same choice that the others have made, independently of their own private information signals. Investors feel reassu...

Making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes. PURPOSES AND PRINCIPLES. Statement of Purposes- The purposes of this Act include the following:CommentsClose CommentsPermalink (1) To preserve and create jobs and promote economic recovery. (2) To assist those most impacted by the recession. (3) To provide investments needed to increase economic efficiency by spurring technological advances in science and health. (4) To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits. (5) To stabilize State and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases. Access the whole Bill

Back to Basics Series (2) Financial markets play a key role to provide investors with liquidity and hence enable them to move capital from low-productive savings to highly-productive investments: schooling, training, research, innovation. On the contrary, capital immobilization is a strong obstacle on investment in the real economy. Indeed nobody is willing to own a piece of a machine producing solar photovoltaic modules since it might not be easy to cash out part of this investment when needed. It is much easier to own a few shares of a listed company such as Applied Materials Inc (NASDAQ:AMAT) to contribute to green investments while being able to get back your money at any time provided that you accept an exposure to market risk and specific risks related to the company. Hence liquidity is useful. Yet it is somehow at this very precise point that liquidity becomes dangerous since it is a first transgression of reality: on one hand the real asset remains highly illiquid and on the ot...

Back to Basics Series (1) (Picture : Léon Walras 1834 - 1910) "PARIS -(Dow Jones)- French Prime Minister Francois Fillon said Friday (January 9th, 2009) the next G20 summit on financial regulation must yield concrete measures and that no market segment or entity should escape regulation in the future." "Financial markets must be regulated!"; behind this current unanimity and dominant thought, can't we recognize the troubling signature of "The Market" itself? Isn't it another expression of its powerful strength to make opinions converge as well as to erase discordant or more complex statements? As John Maynard Keynes used to say : "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally". A majority of market actors wanted to access the high-with-apparent-low-risk subprimes returns. When everything goes wrong the same majority is calling for more regulation. Regulation or deregulation...