Relativity In Money

[Injin]

Barring some kind of star trek replicator thingy making all goods available everywhere and everywhen for free, i can not see how that could happen - even then, people would pay to borrow the replicators.

Value is realtive, which is where we started.

Sometimes you have to pay others to look after your valuable stuff - we used to call it banking,

It's not a new invention - people have making deals of this nature since Grog had spears and Ug didn't

You have to pay the loaner or the loaner has no interest in the deal

And you have to pay those who are looking after your stuff.

You aren't looking at the issue from first principles or logically, you are extrapolating from what happens currently and finding reasons why it should be so.

[Mr Nice]

Value is realtive, which is where we started.

Sometimes you have to pay others to look after your valuable stuff - we used to call it banking,

And you have to pay those who are looking after your stuff.

You aren't looking at the issue from first principles or logically, you are extrapolating from what happens currently and finding reasons why it should be so.

you seem to be leaving out risk and cost of use.

to say that interest is returned just by returning the original item lent would put the loaner behind on every deal.

if I loan my car to a friend, there is going to be so much damage done to the car per mile driven, that needs to be repaid.

and if it is something I do often, then there is a good chance that the car will be totaled in an accident.

that also is going to have to be charged for, usually as a small fee per loaning.

[Injin]

you seem to be leaving out risk and cost of use.

to say that interest is returned just by returning the original item lent would put the loaner behind on every deal.

if I loan my car to a friend, there is going to be so much damage done to the car per mile driven, that needs to be repaid.

and if it is something I do often, then there is a good chance that the car will be totaled in an accident.

that also is going to have to be charged for, usually as a small fee per loaning.

If you loan your car to your friend, then by definition you are getting more out of doing it than you are losing.

You have to be, or you wouldn't do it.

[A.steve]

you'd do yourself a pretty big disservice to arbitrarily choose to not believe in some fairly fundamental aspects of the universe.

Erm, if I don't believe those ideas to be "fundamental aspects of the universe" - but rather to be the the clever spin of malicious vested interests, actually, I don't do myself a disservice.

Actually, I'm amused - I was on thin ice saying I don't believe in black holes - but when I say I don't believe that the natural state of everything is cold-and-dead or that everything deteriorates over time... I'm on a solid footing. I don't deny that many physical processes exhibit decay - but it is quite a step to go from that to say that this is a universal truth. The natural numbers, for example, do not decay - they are as useful and accurate now as when they were first discovered. I do not believe that information necessarily decays, either.

[erat_forte]

All voluntary trades are win/win.

Well they are meant to be - or are considered to be by both parties at the time of the trade. but people can change their minds, or be misled by other people. Have you never bought, or sold, something and later regretted it? Or indeed, refused a sale or a puchase and kicked yourself later?

Perhaps this is interesting for bringing up the nature of time in a different way - as well as the spender/saver dichotomy there is a much shorter term variation in what people value. how does the value of money fit in with that?

edit splng

Edited May 25, 2009 by erat_forte

[Methinkshe]

Erm, if I don't believe those ideas to be "fundamental aspects of the universe" - but rather to be the the clever spin of malicious vested interests, actually, I don't do myself a disservice.

Actually, I'm amused - I was on thin ice saying I don't believe in black holes - but when I say I don't believe that the natural state of everything is cold-and-dead or that everything deteriorates over time... I'm on a solid footing. I don't deny that many physical processes exhibit decay - but it is quite a step to go from that to say that this is a universal truth. The natural numbers, for example, do not decay - they are as useful and accurate now as when they were first discovered. I do not believe that information necessarily decays, either.

Since the transmission of information cannot be perfect, there must be decay in information. If it is not transmitted it cannot inform and therefore ceases to be information and if it is transmitted it is subject to decay through imperfect transmission processes.

[Methinkshe]

Value is realtive, which is where we started.

I am going to propose that time, specifically human-time - i.e. that unknown number of years allotted to every individual - is the standard against which value is measured.

No-one can in and of themselves secure more than 24 hours in a day, 7 days in a week etc. To increase their quantity of human-time, they must purchase the time of another. Within that time, value can be created. The more time the more value that can be created.

However, not everyone's time is equally productive, so there must be a quality attached to human-time as well as a quantity.

Human-time is created at birth and is destroyed at death.

[Stars]

Value is realtive, which is where we started.

Yes value is relative

So if the value to somebody else of having your stuff for a period is greater to them, than the value of somebody looking after your stuff is to you then a deal can only be struck if you are paid to lend.

Edit to say, the above is not quite true and not quite what i meant

And you have to pay those who are looking after your stuff.

And this is a deal in which the actors have different interests and therefore come to a different arrangement.

You aren't looking at the issue from first principles or logically, you are extrapolating from what happens currently and finding reasons why it should be so.

Which first principle am i overlooking?

Edited May 25, 2009 by Stars

[Injin]

Well they are meant to be - or are considered to be by both parties at the time of the trade. but people can change their minds, or be misled by other people. Have you never bought, or sold, something and later regretted it? Or indeed, refused a sale or a puchase and kicked yourself later?

Perhaps this is interesting for bringing up the nature of time in a different way - as well as the spender/saver dichotomy there is a much shorter term variation in what people value. how does the value of money fit in with that?

edit splng

That's a fine point.

One thing that a market does is sort such problems out - the larger the market the more quickly a fraud is discovered.

In fact, the only way for a fraud to remain in place is by non market means (state/mafia/secret society enforcement, psychological dependancy on myth etc.)

It is very much so a falsehood to assume perfect knowledge in all particiapnts - in fact an equally big mistake is to assume that perfect knowledge is at all possible.

[pilchardthecat]

So if I had more buboes than my neighbour, they would automatically want more themselves?

Probably not if it was just you, there is some sort of critical mass.

If 99% of the country lived in mud huts, you would probably aspire to owning a nice big mud hut.... but they don't, so you want bricks, AGAs and block paving.

(When i say 'you' i mean people generally)

[Injin]

Yes value is relative

So if the value to somebody else of having your stuff for a period is greater to them, than the value of somebody looking after your stuff is to you then a deal can only be struck if you are paid to lend.

Edit to say, the above is not quite true and not quite what i meant

And this is a deal in which the actors have different interests and therefore come to a different arrangement.

Which first principle am i overlooking?

Supply and demand.

If jam is generating a 15% interest rate, it's worthwhile asking why people aren't making jam until the interest rate is down to zero.

Profit attract investment, ceteris paribus.

[Stars]

Supply and demand.

If jam is generating a 15% interest rate, it's worthwhile asking why people aren't making jam until the interest rate is down to zero.

Profit attract investment, ceteris paribus.

All this means is that jam is not borrowed, because there is no need to borrow it

All the while there is a need to borrow it, the lender can charge.

[Injin]

All this means is that jam is not borrowed, because there is no need to borrow it

All the while there is a need to borrow it, the lender can charge.

Why?

If he charges, jam production will ensue and his jam will become relatively worthless.

Then he can't charge and his jam is worth less. The only way interest payments make any sense is in a captive environment with an arbitary monopoly.

[Stars]

Why?

If he charges, jam production will ensue and his jam will become relatively worthless.

Then he can't charge and his jam is worth less. The only way interest payments make any sense is in a captive environment with an arbitary monopoly.

Using the same logic -

If a jam seller charges anything at all for his jam he is 'tempting' others to make their own jam to get around his charges and make jam for a lower price than he is selling, thereby lowering the price of his jam.

So does it logically follow that by charging anything for jam, he is committing economic suicide? No..it's the way the system works - If interest can be charged for jam, it is because people consider the price charged for their intended use to be lower than the costs involved in creating it themselves.

Edit to add, - jam is not a very good example to use..something like a saw mill or a metal press makes more sense

Edited May 25, 2009 by Stars

[A.steve]

An interesting chain of points, which I believe are about the same central issue. There are two views on what a probability is: a way to model a random variable, or a way to model the unknown. I think that these correspond roughly to the Bayesian or Frequentist approaches, although my maths background isn't up to saying that for definite. So under the Bayesian approach we have a view that the underlying phenomena is actually random, and that some distribution is a good model of the outcome of that phenomena. As I understand it the Frequentist approach doesn't make that assumption, but instead asks how likely it is that observed outcomes are due to a randomness.

An interesting point - and yes, I think it is broadly correct. I had to look up frequentist to check - though bayesian is a term with which I'm very familiar. That wikipedia article is extremely interesting... not especially for its rather mundane content about observational statistics, but for the characters it associates with that specific school.

• John Venn - of Venn diagram fame (I always thought they were intellectually light when I was forced to do them at primary school...) who, judging by his dates, must have shared Frege's perspective on sets... the same Frege (and the same set theory) which was utterly demolished by Bertrand Russell when he revolutionised maths - throwing out fundamental belief in sets and adopting axioms - a basis for mathematics which remains state of the art today.

• Ronald Fisher - who I assume was related somehow to Irving Fisher (the depression era economist and eugenicist) -- and, amazingly, allegedly, he also was a founder member (along with John Maynard Keynes) of the Cambridge Eugenics society.

• Richard von Mises - brother of Ludwig von Mises (architect of Austrian School economics) with whom we are lead to believe he had intellectual differences.

What a motley bunch - mathematicians from discredited schools of thought; and eugenicist economists... scary. If ad hominem was sufficient, that would be a dead idea, in my book. The mathematical reason it's a failure is, essentially, as they say on the wiki page, because there would need to be an infinite sequence of observations in order to establish an accurate result... and infinite data sequences are not practical... especially not if you want to deal with future events - where collecting the data samples is obviously impossible. Perhaps the Frequentist school can explain much of what is wrong with economic theory?

I'm still blown-away by the revelation that Keynes was involved with a eugenics group. That's fairly worrying in the context of Gordon Brown saying that "we're all Keynesian now". I wonder if he means that his cabinet is entirely populated by eugenicists? Actually - while I'm sure I read/heard him say it - I can't find any reference today. Am I imagining that quote? Has someone duped me into believing he said it - it seems odd that it is a 1965 Time Magazine headline.

So when you say that any "clearly defined" problem has the maths to resolve it then I would agree - for some value of clearly defined. But when we start talking about the behaviour of groups of people and expectations of their aggregate behaviour I don't think that the problem is clearly defined. One lack of definition is the question of individual motives and desires. Even if we accept a coarse approximation of that issue, and try to establish what effects groups of individuals will produce then we run into problems straight away. One straight-forward approach is to treat each individual as an actor in a game, use a simple definition of utility to justify their actions and try and compute some equilibrium to the game. But this approach runs into problems straight away - what is a rational actor? How much does each actor know about the game, the structure of the game, and the desires and motives of the other players? Is everybody in the game really the same type of actor? Is self-interest a good model for the whole population, or only for part of it?

You might be right - but I suspect for the wrong reasons. I definitely can do maths about the behaviour of groups and people and get stable reliable results. I can't do this in all circumstances - and the input data available might well be inadequately detailed for the sort of answer you want, but it is not inherently problematic. There is a wealth of knowledge and tools to deal with systems which involve feedback - the problem with social problems, however, is usually in trying to work out what to model in order that meaningful measurements can be made... coupled with the problem that those who commission such work usually have an unrealistic expectation about the detail that should be in the conclusion - which tends to subvert the process to placate the 'customer'.

I became very interested in this subject, so recently took an online Yale Uni course "Introduction to Game Theory" which takes the form of 24-hours of lectures videoed in front of a hundred or so Yale students. I thoroughly recommend watching the videos... the pitch is gentle and I can't imagine anyone with A-level education finding themselves out of their depth. What struck me most was the presentation... and the reaction of the students. All the students (while obviously at a prestigious university) seemed lacklustre compared to the people I went to Uni alongside. No-one seemed willing to be a smart-****... none of the answers to class questions had any wit - and, while the lecturer was clearly adept... I don't see why that should mean he doesn't get intellectual heckling when he asks the class dumb questions. Actually verging on frightening was that no-one questioned any of the initial states of any of the games... (games in game theory start with payoff functions which are supposed to model motivation... and, from this formalism, we typically identified dominated strategies and Nash equilibria in an attempt to predict outcomes.) From the get-go, I was (pointlessly) heckling my monitor - I could hardly believe that in almost every lecture the entire audience let the lecturer get away with a slight of hand that would make David Copperfield look unambitious. Essentially, the lecturer starts talking about some real world situation that can be modelled as a game - then he draws up a table of payoffs - and chalks in some numbers. Next, he admits that the numbers themselves might be wrong - but if you really cared you could go away and get some better numbers. At no point whatsoever does anyone seem to think that a static number is an inappropriate representation for an uncertain pay-off. No-one says, sure - you're numbers are wrong... but I don't think any number would be right. To me, it seems utterly incredible - as if I'm watching a bad illusionist dupe a crowd... except that this was no illusionist and this crowd were the next generation of employees in the financial industry. Not one of them questioned who controlled the payoff function - and if subverting that was the best game strategy.

Don't get me wrong - I got what I wanted from the course - a summary of the terminology commonly used by the game theory community... but I was amazed that everyone there seemed to be regurgitating rote learned facts - even in spite of audience participation... the students all seemed placid - like sheep... though, maybe, the bright ones were hiding in the balcony avoiding being filmed...

Of relevance here is the notion of pay-off functions. These functions clearly assumed money (they were assumed to form a metric space) - but this was never made explicit... and, slightly more explicit was the message that the payoff-functions that matter might not be the ones you expect - and they can, likely, be manipulated without anyone noticing.

The more coarse our model becomes, and the more that we admit that we don't know how some of the basic parts work, then the more useful probability becomes. But when we are looking a complex deterministic system, modelling it as having random behaviour does indeed produce its own difficulties. There is a strange boundary between "can't know" ie the outcome of a coin-flip, and "don't know" as it what will Bill Jones do in this particular condition. One argument that can be used here is once we have extracted all of the information that we can find from the problem (and this goes into the entropy debate from earlier in the thread), then whatever is left must look random. But of course if we are wrong, say we haven't extracted all of the non-random information from a system, then attempting to model it as random variables will fail. In particular if there are correlations between variables that we have assumed are random (and hence independent) then we will get garbage come out of the model in certain places.

The difference between "can't know" and "don't know" - of course, is utterly fundamental. It is why I consider such models to be the tools of exploiters... the models can't work... for very long, at least, as a result of their nature.

I don't think I agree that probability is more useful in more course grained models - in fact, I'm pretty sure that's false. It is the idea that you can ignore the difference between "can't know" and "don't know" if you ignore it on a large enough scale that got us into our current financial mess.

Edited May 25, 2009 by A.steve

[Injin]

Using the same logic -

If a jam seller charges anything at all for his jam he is 'tempting' others to make their own jam to get around his charges and make jam for a lower price than he is selling, thereby lowering the price of his jam.

Yes but he doesn't want the jam, that's why he sells it, in addition he has to be able to sell the jam for less than they can make it for themselves or they simply won't bother buying it from him.

The whole point about lending is that he really wants the jam, just not right now. There is no interest payment due to those we have sold things to, is there?

So does it logically follow that by charging anything for jam, he is committing economic suicide? No..it's the way the system works - If interest can be charged for jam, it is because people consider the price charged for their intended use to be lower than the costs involved in creating it themselves.

Edit to add, - jam is not a very good example to use..something like a saw mill or a metal press makes more sense

Ah sorry - in our model I thought jam was a money.

[Mr Nice]

Erm, if I don't believe those ideas to be "fundamental aspects of the universe" - but rather to be the the clever spin of malicious vested interests, actually, I don't do myself a disservice.

Actually, I'm amused - I was on thin ice saying I don't believe in black holes - but when I say I don't believe that the natural state of everything is cold-and-dead or that everything deteriorates over time... I'm on a solid footing. I don't deny that many physical processes exhibit decay - but it is quite a step to go from that to say that this is a universal truth. The natural numbers, for example, do not decay - they are as useful and accurate now as when they were first discovered. I do not believe that information necessarily decays, either.

not believing in black holes is just so crazy as to be better left not talking about.

universal decay applies to physical systems.

saying something like "alphabets don't decay." doesn't disprove that.

since perfect copies can't be made, there will always be information loss whenever transmission is required.

[Stars]

Yes but he doesn't want the jam, that's why he sells it, in addition he has to be able to sell the jam for less than they can make it for themselves or they simply won't bother buying it from him.

And i agree..but i don't see how this conflicts with what I'm saying

If the price of borrowing jam is zero, it will be because nobody wants to do it.

The whole point about lending is that he really wants the jam, just not right now. There is no interest payment due to those we have sold things to, is there?

But, it's not a matter of what is 'due', it's a matter of the interests of the people involved and what (if anything) they get out of a deal. The lender has no reason to lend unless he is paid to do so.

We can change jam to money if you wish

[Injin]

And i agree..but i don't see how this conflicts with what I'm saying

If the price of borrowing jam is zero, it will be because nobody wants to do it.

But, it's not a matter of what is 'due', it's a matter of the interests of the people involved and what (if anything) they get out of a deal. The lender has no reason to lend unless he is paid to do so.

We can change jam to money if you wish

I think you've assumed that the only payment is monetary there.

Is that really true?

Do you only lend your friend your car to get a pound out of him?

[A.steve]

not believing in black holes is just so crazy as to be better left not talking about.

Fair enough - scepticism is sometimes a lonely path... if frequently rewarding - if you care about being right. I have not offered any alternative explanation other than black-holes - just stated that I don't find the black hole explanation credible - this might be because it is only part of a bigger picture - or it might, simply, be wrong.

universal decay applies to physical systems.

saying something like "alphabets don't decay." doesn't disprove that.

since perfect copies can't be made, there will always be information loss whenever transmission is required.

I recognise the evidence that many physical systems decay - but I point you at Mill's work on falsification. Your position seems remarkably similar to that of an English botonist who states all swans are white - and when someone says "How do you know? I don't believe you..." responds that it's obvious - because he can show me lots and lots of swans - all of which are white. The botanist was wrong - black swans do exist, and he was wrong even if the person disbelieving him had no idea that he'd need to look in Australia for a non-white swan to prove the case.

A more direct and physical question might be this: can you prove to me that electrons decay? What about photons? Does space decay - and, if it does, how would we discover this?

One should always be very careful with the logic of existential quantification. It's very easy to get it wrong... almost to the extent that, except in pure logic and mathematics, you often don't need to read further than "always" "every" or "all" in order to dismiss the statement as flawed.

P.S. Who says perfect copies can't be made? I don't believe that. In fact, what do you mean by a perfect copy - that's not even a well founded concept... how are you going to test? what sort of perfection are you looking for (there are many)?

Edited May 25, 2009 by A.steve

[A.steve]

If the price of borrowing jam is zero, it will be because nobody wants to do it.

Might there be a gap in the market for a jam-lease exchange? I could kick start it with half-a-jar of blackberry jelly - it's lovely, I promise. If taking physical delivery is a problem for you, for a small charge, I'll keep it refrigerated for you in segregated storage.

Edited May 25, 2009 by A.steve

[Injin]

Might there be a gap in the market for a jam-lease exchange? I could kick start it with half-a-jar of blackberry jelly - it's lovely, I promise. If taking physical delivery is a problem for you, for a small charge, I'll keep it refrigerated for you in segregated storage.

[Mr Nice]

Fair enough - scepticism is sometimes a lonely path... if frequently rewarding - if you care about being right. I have not offered any alternative explanation other than black-holes - just stated that I don't find the black hole explanation credible - this might be because it is only part of a bigger picture - or it might, simply, be wrong.

I recognise the evidence that many physical systems decay - but I point you at Mill's work on falsification. Your position seems remarkably similar to that of an English botonist who states all swans are white - and when someone says "How do you know? I don't believe you..." responds that it's obvious - because he can show me lots and lots of swans - all of which are white. The botanist was wrong - black swans do exist, and he was wrong even if the person disbelieving him had no idea that he'd need to look in Australia for a non-white swan to prove the case.

A more direct and physical question might be this: can you prove to me that electrons decay? What about photons? Does space decay - and, if it does, how would we discover this?

One should always be very careful with the logic of existential quantification. It's very easy to get it wrong... almost to the extent that, except in pure logic and mathematics, you often don't need to read further than "always" "every" or "all" in order to dismiss the statement as flawed.

P.S. Who says perfect copies can't be made? I don't believe that. In fact, what do you mean by a perfect copy - that's not even a well founded concept... how are you going to test? what sort of perfection are you looking for (there are many)?

photons and electrons can reak down into their constituent quarks.

as for space decaying, it usually wouldn't since to "decay" you would really need to have an absence of matter/waves/particles, and that wouldn't tend to happen once it has started.

you really seem inclined not to believe many things, which is ok with me, but really isn't something I care to discuss.

just keep in mind that usually, not always, the guy that thinks the whole world is wrong, is the one that ends up being wrong in the end.

especially with physics, there are thousands of people that believe all the scientists are wrong, and only they understand the true nature of the universe.

discussion with them end up being usually painful and pointless.

[A.steve]

photons and electrons can reak down into their constituent quarks.

Is that their natural state? Is it inevitable that all electrons will "reak down" - sounds smelly.

especially with physics, there are thousands of people that believe all the scientists are wrong, and only they understand the true nature of the universe.

I believe that some vocal people claiming to be 'scientists who know how the world works' are wrong. I make no claim whatsoever that I can do a better job of explaining it. I prefer a cautious approach to belief - since an absence of belief rarely results in catastrophe - whereas a false belief can be very damaging.

Edited May 25, 2009 by A.steve

[Mr Nice]

Is that their natural state? Is it inevitable that all electrons will "reak down" - sounds smelly.

I believe that some vocal people claiming to be 'scientists who know how the world works' are wrong. I make no claim whatsoever that I can do a better job of explaining it. I prefer a cautious approach to belief - since an absence of belief rarely results in catastrophe - whereas a false belief can be very damaging.

again, you don't believe and that's fine, but you would really be better off if you had a few reasons for not believing it, and a few alternatives.

to just say "I don't believe that, I don't know why" is pretty pointless.

like with black holes.

you may not believe in them, but then you should really be able to give a substitution that would fill the void left by taking them out.

they don't just come up with the idea for them out of the blue, there are a lot of pretty specific things that they explain.

even if there are no black holes, there would have to be something that has all of the characteristics of a black hole to take it's place.