Mike,
As you write below:
"But to talk about "an economy" as if it were a thermodynamic system or a
biological dissipative system is, at best, euphonious misdirection. An
investment isn't energy. The laws of thermodynamics don't apply. In such a
context, they're a nice metaphor for casual chat."
I'm afraid that the laws of thermodynamics apply to any system in which
there's activity. If you say that they don't apply in economics in such
strong terms then there's nothing more I can usefully say.
Keith
At 02:03 23/12/2010 -0400, Mike Spencer wrote:
Keith wrote (about the magic $100 bill yarn):
> It's a very clever story and dupes many people. However, it has a
> fallacy within it -- even before it's supposed to represent a
> stimulus package....It has a missing component. It may seem trivial,
> but it's not really. No-one has been eating during the whole
> episode!
I think what grabbed me about the story was the uncoupling of finance
from the real and tangible world. Finance is a *pure* abstraction.
The/An economy is an abstraction intended to have a 1:1 correspondence
with the real world, at least in the aggregate. But finance can wag
the dog, influence people's thoughts and behavior and make the economy
change. That's kinda the point of the yarn.
> What this means in formal terms is that a cyclic economy (that is,
> by far the most part of a normal national economy) still needs
> additional energy coming into it from outside the system to keep the
> cycle going. This is part of the law of thermodynamics -- without
> additional energy, any system gradually dissipates energy merely by
> its activity. It cannot keep going except by constant injections of
> energy.
Well, now your mixing metaphors so badly that it's hard to even parse.
> As to the story exemplifying how a stimulus works (level 2), this is
> even more lacking as a model. A real stimulus in an economy means
> that it is has to be an additional input over and above the normal
> "topping up" energy required for a cyclic economy. The additional
> input is, in formal economic terms, investment.
Ditto.
Many of the metaphors used in biz, commerce, finance, derive from
biology, physics and other hard science. But they're metaphors.
'"...plan to grow the product line...", said CEO Joseph King.' Plants
and animals grow but not everything that gets bigger "grows", it just
gets bigger. Moreover, even farmers don't grow things, the things just
grow and the farmer looks after the surroundings. Yet this metaphor is
universal and deeply embedded because all human culture derives from
biology where things do grow.
Growing things -- plants, animals, microbes -- do just as you say.
They're "dissipative systems" that, because of the highly evolved
chemistry of carbon, absorb energy, create ordered (thus high-energy)
constructs with less than 100% efficiency (in the numerical,
thermodynamic sense) and dissipate the "wasted" energy. What we call
"organisms" are machines for doing this. [1]
Steam engines don't use input energy to create ordered constructs.
They do work, -- exert a force through a distance -- again with less
than 100% efficiency. The body of thermodynamic theory, AFAIK, started
with trying to explain and improve steam engines.
But to talk about "an economy" as if it were a thermodynamic system or
a biological dissipative system is, at best, euphonious misdirection.
An investment isn't energy. The laws of thermodynamics don't apply.
In such a context, they're a nice metaphor for casual chat. Of $100
invested in a project -- i.e. handed over to somebody or other -- some
of it will always be wasted. But that's not a law of physics. In
order to keep the organism of a city or corporation healthy, you need
a cash flow, some of which is dissipated and only part of which ends
up as building urban liver or corporate blood. Engaging talk but it's
metaphor, not physics, thermodynamics don't apply and we need to look
for other, less facile models to see what happens to money and how
real stuff is accomplished.
I think that the phrase "gaming the system" has emerged in my
lifetime, possibly in the lqast 20 years. The thing it describes has
been around, approximately, forever. And as far as I can see, the
practice of finance consists mostly of devising strategies to
do that. You learn the rules, you learn how things actually work
given the rules, you establish yourself (your company, your fund or bank)
as someone who can and does operate under the rules. Then you analyze
both the rules and how things are done under the rules in order to
end-run the rules, outsmart the other players, locate the system's
weaknesses, and so on. That's where the big killings, the windfalls,
the gushing revenue streams lie. Getting people into houses they own
or corporations emitting product is just making license plates, the
hohum base of operations upon which the real game is played.
In this view, Enron and Madoff are not special bad-apple cases.
They're not like the murder indictment of some chap in a bout of
good-natured fisticuffs whose opponent fell and hit his head fatally
on a rock. They're more like the phone cam capture of an incident
with an unbridled police department whose officers routinely beat
senseless anyone they don't like. Stupid sods, they got caught and
gave the game a bad name.
So far as I know, nobody has done any systems theory-type work on how
to model gaming the system. [2]
Of course, I've over-simplified for the sake of rhetoric. And I feel
bad that my responses to Keith tend to be critical. I trust you don't
take them as personally hostile, Keith.
Taking a what may be a sharp turn,
Got a complicated problem? Hold a prize competition to solve it.
That's the basic idea behind the America Competes Act renewed by
Congress this week.
The Competes act now gives every department and agency the authority
to conduct prize competitions, according to the White House's Office
of Science and Technology Policy. Prizes and challenges have an
excellent track record of accelerating problem-solving by tapping
America's top talent and best expertise.
According to the Office of Science and Technology Policy blog:
"Whether it's developing new products that will be manufactured in
America, or getting and using energy more sustainably, or improving
health care with better therapies and better use of information
technology, or providing better protection for our troops abroad and
our citizens at home, innovation will be key to our success."
http://www.networkworld.com/community/blog/us-offer-plethora-prize-competitions-solve-to
How about a contest to craft a system (and a method for implementing
it) that keeps the financial industry, its players and its lawyers
from gaming the system and compels them to work for socially
constructive ends? Submit a theoretical base, a legislative program
and a legal strategy to take to the supreme court when the poor,
threatened [3] players of Wall Street (Bay Street, the City) take
their anguished cries thence?
- Mike
[1] Not to imply teleology here.
[2] Maybe this is so sefl-referential or intrinsically recursive that
it's provably impossible. Or not. Where is the Santa Fe Institute
when you need them?
[3] They'll say "terrorized", won't they?
--
Michael Spencer Nova Scotia, Canada .~.
/V\
[email protected] /( )\
http://home.tallships.ca/mspencer/ ^^-^^
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Keith Hudson, Saltford, England
<http://allisstatus.wordpress.com/2010/12/>http://allisstatus.wordpress.com/2010/12/
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