In 1974 an article appeared in Science magazine with the dry-sounding title “Judgment Under Uncertainty: Heuristics and Biases” by a pair of psychologists who were not well known outside their discipline of decision theory. In it Amos Tversky and Daniel Kahneman introduced the world to Prospect Theory, which mapped out how humans actually behave when faced with decisions about gains and losses, in contrast to how economists assumed that people behave. Prospect Theory turned Economics on its head by demonstrating through a series of ingenious experiments that people are much more concerned with losses than they are with gains, and that framing a choice from one perspective or the other will result in decisions that are exactly the opposite of each other, even if the outcomes are monetarily the same. Prospect Theory led cognitive psychology in a new direction that began to uncover other human biases in thinking that are probably not learned but are part of our brain’s wiring.

Thinking fast and slow.

NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS by Richard H. Thaler and Cass R. Sunstein Penguin Books, 2009, 312 pp, ISBN 978-0-14-311526-7This book is best described formally as a general explanation of and advocacy for libertarian paternalism, a term coined by the authors in earlier publications. Informally, it is about how leaders, systems, organizations, and governments can nudge people to do the things the nudgers want and need done for the betterment of the nudgees, or of society. It is paternalism in the sense that "it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better", (p. 5) It is libertarian in that "people should be free to do what they like - and to opt out of undesirable arrangements if they want to do so", (p. 5) The built-in possibility of opting out or making a different choice preserves freedom of choice even though people's behavior has been influenced by the nature of the presentation of the information or by the structure of the decisionmaking system. I had never heard of libertarian paternalism before reading this book, and I now find it fascinating.Written for a general audience, this book contains mostly social and behavioral science theory and models, but there is considerable discussion of structure and process that has roots in mathematical and quantitative modeling. One of the main applications of this social system is economic choice in investing, selecting and purchasing products and services, systems of taxes, banking (mortgages, borrowing, savings), and retirement systems. Other quantitative social choice systems discussed include environmental effects, health care plans, gambling, and organ donations. Softer issues that are also subject to a nudge-based approach are marriage, education, eating, drinking, smoking, influence, spread of information, and politics. There is something in this book for everyone.The basis for this libertarian paternalism concept is in the social theory called "science of choice", the study of the design and implementation of influence systems on various kinds of people. The terms Econs and Humans, are used to refer to people with either considerable or little rational decision-making talent, respectively. The various libertarian paternalism concepts and systems presented are tested and compared in light of these two types of people. Two foundational issues that this book has in common with another book, Network of Echoes: Imitation, Innovation and Invisible Leaders, that was also reviewed for this issue of the Journal are that 1 ) there are two modes of thinking (or components of the brain) - an automatic (intuitive) process and a reflective (rational) process and 2) the need for conformity and the desire for imitation are powerful forces in human behavior. …

Nudge: Improving Decisions about Health, Wealth, and Happiness

QUANTUM gravitational effects are usually ignored in calculations of the formation and evolution of black holes. The justification for this is that the radius of curvature of space-time outside the event horizon is very large compared to the Planck length (Għ/c3)1/2 ≈ 10−33 cm, the length scale on which quantum fluctuations of the metric are expected to be of order unity. This means that the energy density of particles created by the gravitational field is small compared to the space-time curvature. Even though quantum effects may be small locally, they may still, however, add up to produce a significant effect over the lifetime of the Universe ≈ 1017 s which is very long compared to the Planck time ≈ 10−43 s. The purpose of this letter is to show that this indeed may be the case: it seems that any black hole will create and emit particles such as neutrinos or photons at just the rate that one would expect if the black hole was a body with a temperature of (κ/2π) (ħ/2k) ≈ 10−6 (M/M)K where κ is the surface gravity of the black hole1. As a black hole emits this thermal radiation one would expect it to lose mass. This in turn would increase the surface gravity and so increase the rate of emission. The black hole would therefore have a finite life of the order of 1071 (M/M)−3 s. For a black hole of solar mass this is much longer than the age of the Universe. There might, however, be much smaller black holes which were formed by fluctuations in the early Universe2. Any such black hole of mass less than 1015 g would have evaporated by now. Near the end of its life the rate of emission would be very high and about 1030 erg would be released in the last 0.1 s. This is a fairly small explosion by astronomical standards but it is equivalent to about 1 million 1 Mton hydrogen bombs. It is often said that nothing can escape from a black hole. But in 1974, Stephen Hawking realized that, owing to quantum effects, black holes should emit particles with a thermal distribution of energies — as if the black hole had a temperature inversely proportional to its mass. In addition to putting black-hole thermodynamics on a firmer footing, this discovery led Hawking to postulate 'black hole explosions', as primordial black holes end their lives in an accelerating release of energy.

Black Hole Explosions

The task of quantizing general relativity raises serious questions about the meaning of the present formulation and interpretation of quantum mechanics when applied to so fundamental a structure as the space-time geometry itself. This paper seeks to clarify the foundations of quantum mechanics. It presents a reformulation of quantum theory in a form believed suitable for application to general relativity. The aim is not to deny or contradict the conventional formulation of quantum theory, which has demonstrated its usefulness in an overwhelming variety of problems, but rather to supply a new, more general and complete formulation, from which the conventional interpretation can be deduced. The relationship of this new formulation to the older formulation is therefore that of a metatheory to a theory, that is, it is an underlying theory in which the nature and consistency, as well as the realm of applicability, of the older theory can be investigated and clarified.

"relative State" Formulation of Quantum Mechanics

When all thermonuclear sources of energy are exhausted a sufficiently heavy star will collapse. Unless fission due to rotation, the radiation of mass, or the blowing off of mass by radiation, reduce the star's mass to the order of that of the sun, this contraction will continue indefinitely. In the present paper we study the solutions of the gravitational field equations which describe this process. In I, general and qualitative arguments are given on the behavior of the metrical tensor as the contraction progresses: the radius of the star approaches asymptotically its gravitational radius; light from the surface of the star is progressively reddened, and can escape over a progressively narrower range of angles. In II, an analytic solution of the field equations confirming these general arguments is obtained for the case that the pressure within the star can be neglected. The total time of collapse for an observer comoving with the stellar matter is finite, and for this idealized case and typical stellar masses, of the order of a day; an external observer sees the star asymptotically shrinking to its gravitational radius.

On Continued Gravitational Contraction

The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.

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The network of global corporate control

We present a methodology to extract the backbone of complex networks based on the weight and direction of links, as well as on nontopological properties of nodes. We show how the methodology can be applied in general to networks in which mass or energy is flowing along the links. In particular, the procedure enables us to address important questions in economics, namely, how control and wealth are structured and concentrated across national markets. We report on the first cross-country investigation of ownership networks, focusing on the stock markets of 48 countries around the world. On the one hand, our analysis confirms results expected on the basis of the literature on corporate control, namely, that in Anglo-Saxon countries control tends to be dispersed among numerous shareholders. On the other hand, it also reveals that in the same countries, control is found to be highly concentrated at the global level, namely, lying in the hands of very few important shareholders. Interestingly, the exact opposite is observed for European countries. These results have previously not been reported as they are not observable without the kind of network analysis developed here.

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Backbone of Complex Networks of Corporations: The Flow of Control

We have discovered 12 independent new empirical scaling laws in foreign exchange data series that hold for close to three orders of magnitude and across 13 currency exchange rates. Our statistical analysis crucially depends on an event-based approach that measures the relationship between different types of events. The scaling laws give an accurate estimation of the length of the price-curve coastline, which turns out to be surprisingly long. The new laws substantially extend the catalogue of stylized facts and sharply constrain the space of possible theoretical explanations of the market mechanisms.

Patterns in high-frequency FX data: discovery of 12 empirical scaling laws

We present here an overview of the use of networks in Finance and Economics. We show how this approach enables us to address important questions as, for example, the structure of control chains in financial systems, the systemic risk associated with them and the evolution of trade between nations. All these results are new in the field and allow for a better understanding and modelling of different economic systems.

The Structure of Financial Networks

Physical In effect, the Book of Nature can now be rephrased with modern concepts. Quintessentially, knowledge generation is an act of translation in the human mind. Aspects of the physical world are encoded as formal representations, like mathematical equations. These abstractions inhabit an abstract world of their own and follow their own rules of consistency. The humanmind can access andmanipulate the formal representations in the abstract world and decode them. This happens by predicting behaviors 1.2 The Story in a Nutshell 11 of the physical world, from abstract insights, which then can be empirically tested. This knowledge generation process is illustrated in Fig. 2.1 on Page 45: Modern examples of this mechanism are discussed, starting with Isaac Newton’s prototypical physical theory of classical mechanics. The interplay between mathematics and physics is examined and some aspects of mathematics analyzed. Several biographies are presented. Philosophers and insightful scientists realized that this intimate interplay of the human mind with the workings of the universe poses mystifying challenges. In essence, three worlds are interacting: the physical, the mental, and the abstract. More sober scientists have declared “Shut up and calculate!” and circumvent such philosophical artifacts by focusing on the formalism. On a technical note, the contents of this and the two following chapters are necessarily laden with mathematical symbolism. In order for the non-mathematical reader to still be able to follow the narrative, a precaution is taken. All of the more involved equations are clearly delimited, allowing the reader to avoid these abstract pitfalls. To this aim, special attributed tags are introduced, denoted by { . . . }, which encapsulate the mathematical formalism. See also the User Manual on Page xv. Chapter 3: The Semantics of Symmetry, Invariance, and Structure A case study of how the notion of symmetry underpins modern physics. The intuitive idea of symmetry is formalized as a mathematical concept (group theory). Now it becomes an ideal vessel for encoding aspects of the physical world in abstract terms, illustrating the act of knowledge generation via translation. Symmetry can be intuitive and elusive at the same time. Obvious and straightforward notions related to it can result in deepmathematical structures being uncovered, which mirror the workings of the universe. Namely, invariance, the concept that the manipulations of a system leave it unchanged. For instance, rotating an unmarked cube by 90◦ along any of its three axes leaves it indistinguishable from its original orientation. The cube is invariant under such transformations. Requiring that the outcome of a physical experiment should not depend on the time and location it is performed at can be expressed mathematically as invariance. In detail, the invariance of physical theories under changes in space and time result in conservation laws, specifically the conservation of momentum and energy in the universe. This theme goes to the heart of theoretical physics (Emmy Noether’s theorem). The fundamental symmetries of space-time are encoded as a mathematical group and give rise to

James B. Glattfelder

Papers

The network of global corporate control

Backbone of Complex Networks of Corporations: The Flow of Control

Patterns in high-frequency FX data: discovery of 12 empirical scaling laws

The Structure of Financial Networks

Information--Consciousness--Reality: How a New Understanding of the Universe Can Help Answer Age-Old Questions of Existence