AI and Geoeconomics

De astronoom,  Johannes Vermeer, Musée du Louvre Founding theories Extract from John von Neumann and Oskar Morgenstern:  Theory of Games and Economic Behavior , Princeton University Press (1944). Full text here 1.2. Difficulties of the Application of the Mathematical Method   1.2.1. It may be opportune to begin with some remarks concerning the nature of economic theory and to discuss briefly the question of the role which mathematics may take in its development.   First let us be aware that there exists at present no universal system of economic theory and that, if one should ever be developed, it will very probably not be during our lifetime. The reason for this is simply that economics is far too difficult a science to permit its construction rapidly, especially in view of the very limited knowledge and imperfect description of the facts with which economists are dealing. Only those who fail to appreciate this condition a...

Michel Angelo -  Sistine Chapel ceiling As Italians will choose a new government in elections on 24 -25 February, the international press comments and evaluates the chances for “il professore” to lead Italy again. As a lifetime senator, Mario Monti cannot run for office but can take part in an election campaign and can return to the post of prime minister if asked by a party or coalition. BBC News Online 27 December 2012   Last updated at  19:40 GMT L'Osservatore Romano [the Vatican’s newspaper] said Mr Monti, a loyal Catholic, had launched an appeal to restore the most noble sense of politics to Italy. The Pope, in his Christmas message, urged Italians to reflect on "a hierarchy of values when making the most important of choices". The remark was widely interpreted as coming close to endorsing the technocrat leader. On Christmas Day, Mr Monti sent his first tweet, calling for political renewal: "There is no point in...

Leonardo da Vinci - Gearings A systemically important financial institution (SIFI) is a bank, insurance company, or other financial institution whose failure could trigger a global financial crisis. As the 2007-2012 global financial crisis has unfolded, the international community has moved to protect the global financial system through preventing the failure of SIFIs, or, if one does fail, limiting the adverse effects of its failure. The Basel Committee on Banking Supervision introduced new regulations (known as Basel III) that also specifically target SIFIs. The main focus of the regulations is to increase bank capital requirements and to introduce capital surcharges for systemically important banks. The Financial Stability Board has just updated in November its list of global systemically important financial institutions (G-SIFIs). The FSB defines SIFIs as "financial institutions whose distress or disorderly failure, because of their size, complexity and system...

Christine Lagarde (IMF) and Mario Draghi (ECB) Exaggerated fear has been overcome Graph and numbers from the last six months are clear: investors are coming back on the European equity market. Whereas the Nasdaq composite or the Dow Jones indices performances over the last six months are below 10% , the European equity index Euro Stoxx 50 performance during that period is close to 25% (see Fig. 1). Clearly, the realized volatility of the European Index is still much higher than its American counterparts (28% for the EURO STOXX 50 vs 13%-15% for the American indices). One might then say: “ok, this is just a windows-measurement effect – wait a little bit and you will see the realized volatility getting back the European performance”.  Fig 1. Euro Stoxx 50 positive bias - June/Nov 2012 Yet something else is happening here: the addition of risk in the European shares is converted into performance with a much better efficiency (conversion rate = Sharpe ratio) than it is o...