POLITICS
03/27/2009 05:12 am ET Updated May 25, 2011

Scritti Politti: February 24, 2009

BoingBoing pulls this snip from Felix Salmon's latest piece for Wired:

A year ago, it was hardly unthinkable that a math wizard like David X. Li might someday earn a Nobel Prize. After all, financial economists--even Wall Street quants--have received the Nobel in economics before, and Li's work on measuring risk has had more impact, more quickly, than previous Nobel Prize-winning contributions to the field. Today, though, as dazed bankers, politicians, regulators, and investors survey the wreckage of the biggest financial meltdown since the Great Depression, Li is probably thankful he still has a job in finance at all. Not that his achievement should be dismissed. He took a notoriously tough nut--determining correlation, or how seemingly disparate events are related--and cracked it wide open with a simple and elegant mathematical formula, one that would become ubiquitous in finance worldwide.

For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched--and was making people so much money--that warnings about its limitations were largely ignored.

Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li's formula hadn't expected. The cracks became full-fledged canyons in 2008--when ruptures in the financial system's foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

David X. Li, it's safe to say, won't be getting that Nobel anytime soon. One result of the collapse has been the end of financial economics as something to be celebrated rather than feared. And Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.

More here.

Deconstructing Bushworld: In order for Barack Obama to seriously address the attendant injustices of the Gitmo detainees, he must be prepared to address the detainees at Bagram AFB the same way. Similarly, in order for anyone to take Obama's addressing of the attendant injustices of the Gitmo detainees seriously, they must be prepared to demand he address the detainees at Bagram AFB the same way.

Taxation With Some Representation, Maybe: The residents of Washington, DC continue to edge closer to obtaining some measure of electoral rights, as next week, the House will vote on DC's voting rights. I know of one astute Twitterer who wondered "...if Nate Silver thought to reserve fivethirtynine and fiveforty domains." (No, apparently.)

Seriously. Whatever Happened To Laying Low?: Man, that David Vitter! Have you noticed that lately, he's really sort of decided that he's got the right to speak out on all sorts of topics? It's true. He's even speaking out about how Roland Burris should resign! Yeah. That's right. Vitter. Who's got scandals of his own? "I honestly don't know anybody who would compare these situations," said Vitter today. "They are dramatically different." INDEED THEY ARE:

In July 2007, published reports identified Vitter as a client of "D.C. Madam" Deborah Jeane Palfrey, whom federal prosecutors convicted of running a prostitution ring. Vitter responded by publicly admitting "a very serious sin in my past," but never offered specifics and was never called to testify in Palfrey's 2008 trial. Palfrey committed suicide last spring between her conviction and sentencing.

I'm probably leaving out the best part.

Balk Gets It Done: "You know what's odd? Matt Drudge, who has put the day's Dow chart front and center pretty much every day for the last three weeks, doesn't have space for it today. For some reason. Probably just an oversight." PRESTO!

Daily Dose of WTF: Remember addlebrained writer Adele Ferguson? Those that do need only recall one phrase from her op-ed career: "the pony in slavery." Well, she's back. With a vengeance.