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Published by Ian Williams

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Published by: Ian Williams on Nov 26, 2012
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http://www.insideinvestorrelations.com/articles/case-studies/19090/comment-measure-madness-modern-systems/Speculator Column IR Magazine, November 2012A measure of madness in modern systemsIan WilliamsFinance has units and premises that make even astrology appear ultra-scientificWe sometimes find, on further investigation, that what we thought was solidly based science is based on foundations of jello. Take the metric system used in allour physics, chemistry, biology and cosmology: it was based on a false premise –that the earth is spherical and fixed in its dimensions.Back in the day, methodical French scientists measured the distance from the pole to the equator, based on the angles of the sun at midday, and divided it by 10mn. Et voila, messieurs! Le mètre!In fact, the earth is not spherical and it changes shape and size over the seasons; but this misconception is the basis of the whole system, along with the seconds and minutes derived from equally spurious certainty about the regularity ofthe calendar.Similarly, most of the world’s railways use a gauge measuring four feet eight anda half inches, allegedly based on five Roman feet; it’s the width of the gates inHadrian’s Wall in the UK and thus of the standard wagon in the north east of England, where George Stephenson built the first rail lines.A foot is of course the length of that flat bit at the end of the leg. So now Chinese high-speed trains whoosh along at hundreds of kilo-meters an hour on tracks built to accommodate a Roman chariot, using units originally pegged to a legionnaire’s boot size.In finance, however, we have units and premises that make the cubit, the scrupleand even astrology appear ultra-scientific. Governments, banks and chief executives prognosticate on, for example, the business cycle – compared with which the spherical nature of the earth is as regular as a ball bearing.Think of the natural rate of interest, currently being ignored by central banksacross the world. Think of the ‘natural rate of unemployment’, altered according toyear and geography. Or think of the good old efficient market theory, blown up more often than a Nevada nuclear test site.This brings me to my developing tableware stationery theory of everything. Muchof our computer hardware is apparently based upon the five and a quarter inch floppy disk, itself the brainchild of a crack design team in a bar using a foldedpaper napkin to illustrate its desired drive dimensions.And it was on yet another table napkin that Arthur Laffer drew the famous curvethat confirmed the already strong opinion of Dick Cheney and Donald Rumsfeld that tax increases were a bad thing.Those Roman legionnaires used to socialize in communal latrines and shoot the breeze. Imagine if their habit had persisted, along with the non-metric foot, intothe modern age – would such discussions have led to computer drives modeled on aroll of toilet tissue?Would the Laffer Curve achieve its apotheosis as a Möbius strip with no beginningand no end so that instead of taxing businesses, governments just kept giving th

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