That particular problem has been solved. My latex and matlab installations were conflicting i.e. a command line call to mex called the latex command instead of matlab version. The problem can be solved by editing the MEXBIN variable in the Makefile.var file to include the full path of the matlab mex file.
MEXBIN = /Applications/MATLAB_R2012a.app/bin/mex
However, even after recompiling spm8 under Lion, the speed is very slow. Is this a known problem with Mac OSX Lion?
Best wishes,
Naveed
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