Really great links - Saving the Eurozone - Bank of England - Moral hazard in ant colonies

Baseline Scenario - To Save The Eurozone - "The liquidity support involved would be large: if we assume that roughly three years of sovereign debt repayments should be fully backed – and it takes that kind of commitment to break such negative sentiment – then approximately $1 trillion would be needed to backstop Greece, Portugal, Spain and Italy. It may be that more funds are eventually needed – but in any case, the amounts would be less than the total reserves of China. These amounts would also be reduced as the euro falls; it could be heading back to well under $1 per euro, which is where it stood one decade ago."

Chris Giles - Bank of England forecasting errors - "The Bank’s forecasting failure has left real output 12 per cent lower than the Bank thought it would be in late 2007, although the Bank thinks the level of GDP will be revised higher by 1.5 per cent from where it is now, making the true difference in the forecasts (a mere) 10.5 per cent.
        With such a large fall in output relative to expectations, the normal consequence would be an undershoot of inflation. But the British price level is also 2 per cent higher now than the Bank thought it would be in November 2007. Oh dear.
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        But it now pretty certain that the level of GDP consistent with stable inflation is much lower than we thought before the crisis, and there has to be a fear that the sustainable rate of growth consistent with stable inflation has fallen, as it did in Japan after its crash in 1990. As Charles Goodhart, former chief economist of the Bank, said: “nobody knows what the sustainable rate [of growth] is and they adjust it relatively slowly to the actual rate. And that’s not particularly encouraging”"

Cheap Talk - Are Ant Colonies more Rational than Humans: Lessons for Organization Theory? - "In other work, Pratt shows that ant colonies obey transitivity (i.e. if a colony prefers A to B and B to C, it prefers A to C).
        Why are ant colonies more rational than individual humans? The authors offer a cool hypothesis: choice between colonies is typically made by sending independent scouts sent to the different options. No scout visits different locations. The scouts reports are simply compared and the best option is chosen. A human being contemplates all the choices by herself and has a harder time comparing the attributes independently leading to a violation of IIA.
        An ant colony is like a well performing and coordinated decentralized firm with employees passing information up the hierarchy and efficient decisions coming down from the center Can we import lessons into designing firms? Alas, I believe not. A human scout evaluating a decision/option will not be as impartial an ant scout. He will exagerrate its qualities, hoping his option “wins”. He hopes to get the credit for finding the implemented option, get promoted, receive stock options and retire young to the Bay Area. In other words, career concerns ruin a simple transfer of ant colony principles to firms. If we eliminate career concerns within the firm, we will induce moral hazard as there is no incentive to exert costly effort to find the best decisions for the firm. Ants in the same colony do not face the same issue as they are genetically related and have “common values”."