The Death of the Rational Market Idea

Amidst the all the discussion of President Obama’s Nobel Prize, the Royal Swedish Academy of Sciences quietly made another political statement by giving the Nobel Prize in Economics to to Elinor Ostrom and Oliver Williamson for their analysis of “economic governance.” The choice of Ostrom and Williamson is notable not only because Ostrom is the first woman to receive the award, but also because she is a professor of political science, and both Ostrom and Williamson are more widely read by political scientists than by economists.

Ostrom and Williamson were long shots to win the prize. The heavy favorite to win was Eugene Fama, who came up with the “efficient-market hypothesis.” According to this hypothesis, market prices always reflect the best information available, so that it is impossible to consistently beat the market without inside information. The problem with this idea—which became the dominant view in economics—is that it can’t explain why bubbles develop or why they burst. The fact is that markets don’t behave as rationally as the efficient market hypothesis supposes.


The current recession may finally be the end of the idea that real markets are priced efficiently. Indeed, as Jeremy Grantham argues, the idea that markets are efficient may even have contributed the current crisis by blinding us to the possibility—by effectively assuming it away—that asset prices might be unrealistic.

By giving the Nobel Prize to Ostrom and Williamson, the prize committee is coming out against the orthodox view that markets operate efficiently by themselves. Because the central insight of Ostrom and Williamson’s work is that it matters how markets are governed—that the structure of our institutions matters. It’s an insight that’s fundamental to the field of political science, but that's still outside the mainstream in academic economics. Indeed, Paul Krugman—who won the Nobel Prize last year—freely admits that he doesn’t really know Ostrom’s work. But the Nobel Prize Committee is right that we need to think more the role institutions play in governing economic behavior, especially as we try to avoid economic crises in the future.

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Why "nuclear pasta" is the strongest material in the universe

Through computationally intensive computer simulations, researchers have discovered that "nuclear pasta," found in the crusts of neutron stars, is the strongest material in the universe.

Accretion disk surrounding a neutron star. Credit: NASA
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  • The strongest material in the universe may be the whimsically named "nuclear pasta."
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Superman is known as the "Man of Steel" for his strength and indestructibility. But the discovery of a new material that's 10 billion times harder to break than steel begs the question—is it time for a new superhero known as "Nuclear Pasta"? That's the name of the substance that a team of researchers thinks is the strongest known material in the universe.

Unlike humans, when stars reach a certain age, they do not just wither and die, but they explode, collapsing into a mass of neurons. The resulting space entity, known as a neutron star, is incredibly dense. So much so that previous research showed that the surface of a such a star would feature amazingly strong material. The new research, which involved the largest-ever computer simulations of a neutron star's crust, proposes that "nuclear pasta," the material just under the surface, is actually stronger.

The competition between forces from protons and neutrons inside a neutron star create super-dense shapes that look like long cylinders or flat planes, referred to as "spaghetti" and "lasagna," respectively. That's also where we get the overall name of nuclear pasta.

Caplan & Horowitz/arXiv

Diagrams illustrating the different types of so-called nuclear pasta.

The researchers' computer simulations needed 2 million hours of processor time before completion, which would be, according to a press release from McGill University, "the equivalent of 250 years on a laptop with a single good GPU." Fortunately, the researchers had access to a supercomputer, although it still took a couple of years. The scientists' simulations consisted of stretching and deforming the nuclear pasta to see how it behaved and what it would take to break it.

While they were able to discover just how strong nuclear pasta seems to be, no one is holding their breath that we'll be sending out missions to mine this substance any time soon. Instead, the discovery has other significant applications.

One of the study's co-authors, Matthew Caplan, a postdoctoral research fellow at McGill University, said the neutron stars would be "a hundred trillion times denser than anything on earth." Understanding what's inside them would be valuable for astronomers because now only the outer layer of such starts can be observed.

"A lot of interesting physics is going on here under extreme conditions and so understanding the physical properties of a neutron star is a way for scientists to test their theories and models," Caplan added. "With this result, many problems need to be revisited. How large a mountain can you build on a neutron star before the crust breaks and it collapses? What will it look like? And most importantly, how can astronomers observe it?"

Another possibility worth studying is that, due to its instability, nuclear pasta might generate gravitational waves. It may be possible to observe them at some point here on Earth by utilizing very sensitive equipment.

The team of scientists also included A. S. Schneider from California Institute of Technology and C. J. Horowitz from Indiana University.

Check out the study "The elasticity of nuclear pasta," published in Physical Review Letters.


How a huge, underwater wall could save melting Antarctic glaciers

Scientists think constructing a miles-long wall along an ice shelf in Antarctica could help protect the world's largest glacier from melting.

Image: NASA
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The world's oceans will rise significantly over the next century if the massive ice shelves connected to Antarctica begin to fail as a result of global warming.

To prevent or hold off such a catastrophe, a team of scientists recently proposed a radical plan: build underwater walls that would either support the ice or protect it from warm waters.

In a paper published in The Cryosphere, Michael Wolovick and John Moore from Princeton and the Beijing Normal University, respectively, outlined several "targeted geoengineering" solutions that could help prevent the melting of western Antarctica's Florida-sized Thwaites Glacier, whose melting waters are projected to be the largest source of sea-level rise in the foreseeable future.

An "unthinkable" engineering project

"If [glacial geoengineering] works there then we would expect it to work on less challenging glaciers as well," the authors wrote in the study.

One approach involves using sand or gravel to build artificial mounds on the seafloor that would help support the glacier and hopefully allow it to regrow. In another strategy, an underwater wall would be built to prevent warm waters from eating away at the glacier's base.

The most effective design, according to the team's computer simulations, would be a miles-long and very tall wall, or "artificial sill," that serves as a "continuous barrier" across the length of the glacier, providing it both physical support and protection from warm waters. Although the study authors suggested this option is currently beyond any engineering feat humans have attempted, it was shown to be the most effective solution in preventing the glacier from collapsing.

Source: Wolovick et al.

An example of the proposed geoengineering project. By blocking off the warm water that would otherwise eat away at the glacier's base, further sea level rise might be preventable.

But other, more feasible options could also be effective. For example, building a smaller wall that blocks about 50% of warm water from reaching the glacier would have about a 70% chance of preventing a runaway collapse, while constructing a series of isolated, 1,000-foot-tall columns on the seafloor as supports had about a 30% chance of success.

Still, the authors note that the frigid waters of the Antarctica present unprecedently challenging conditions for such an ambitious geoengineering project. They were also sure to caution that their encouraging results shouldn't be seen as reasons to neglect other measures that would cut global emissions or otherwise combat climate change.

"There are dishonest elements of society that will try to use our research to argue against the necessity of emissions' reductions. Our research does not in any way support that interpretation," they wrote.

"The more carbon we emit, the less likely it becomes that the ice sheets will survive in the long term at anything close to their present volume."

A 2015 report from the National Academies of Sciences, Engineering, and Medicine illustrates the potentially devastating effects of ice-shelf melting in western Antarctica.

"As the oceans and atmosphere warm, melting of ice shelves in key areas around the edges of the Antarctic ice sheet could trigger a runaway collapse process known as Marine Ice Sheet Instability. If this were to occur, the collapse of the West Antarctic Ice Sheet (WAIS) could potentially contribute 2 to 4 meters (6.5 to 13 feet) of global sea level rise within just a few centuries."