The Recovery Blog will be used to post updates and other information about the Imagining Recovery project. Please check in regularly to learn about new relationships being forged by the project, including venues for the competition exhibition, partnerships with other organizations, and interviews with experts from a number of disciplines, amongst other updates.

The blog will perpetuate the Imagining Recovery project beyond the announcement of the competition winners on Day 114, continuing the issues and serving as a hub for discussion, collaboration and production.

In another article in the same issue of WIRED, A Formula for Disaster, Felix Salmon outlines the probability function – a Gaussian copula function – of David X. Li, a Canadian-educated Chinese statistician which allowed CDOs and other assets now considered “toxic”, to be valued. The reasons for the catastrophic failure of the formula include the necessity of increasing values of homes (some bankers were using rates of 6-8% growth to value the assets that now threaten our economic livelihood), and the reification of a correlation parameter into a constant. This allowed for the calculation of the risk of mortgage defaults to be pinned to Credit Default Swaps, or CDSs, which were already a function of the mortgages themselves. Basically, Li’s formula let bankers make statistical valuations based on current values, instead of historical ones, of which there were almost none for the newly minted CDSs and CDOs.

Before getting to the point, I offer one final interlude. In Roth’s article, he mentions the weight of a Bear Sterns’ – the first investment bank on Wall Street to collapse, sending the financial world into a tailspin – FWP, which totaled 462 pages of un-standardized data. This calls to mind the 1000+ page stimulus bill, the American Reinvestment and Recovery Act, or ARRA, which not a single congressperson or senator read in its entirety.

XBRL is a mark-up language which standardizes tags for financial reporting, allowing easy exportation to spreadsheets for comparative analysis by experts, and, as Roth reports, opens financial accountability to the public. Roth argues for tapping into the “massive parallel processing power of people around the world by giving everyone the tools to track, analyze and publicize financial machinations.” Much in line with the impetus of IMAGINING RECOVERY vis-à-vis Recovery.gov and other moves towards transparency in government, Roth claims, “the volume of data obscures more than it reveals; financial reporting has become so transparent as to be invisible.”He continues that “the era of sunlight has to give way to the era of pixelization; only when we give everyone the tools to see each point of data will the picture become clear.” For Roth, XBRL is a potential solution, one which will be mandated in most arenas of reporting by 2011.

For the purposes of IMAGINING RECOVERY, XBRL can be considered a design solution to a financial and policy problem, that of regulation. In comparing a Bear Sterns FWP with the stimulus package, is there reason to believe that design can also impact policy? Could a simple system of tagging, so effective in the development of the internet, and a means of standardizing such necessities as medical records, also creep into the practice of writing policy? If the clause slipped into the ARRA on Senator Dodd’s watch which allowed for AIG executives to receive outraging bonuses could have been systematically identified, could the current administration have avoided such a scandal? Is this a means of addressing confidence and political will when there may be a need for a future stimulus bill, or for re-election in 2012 if “recovery” has not yet been achieved?