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Thermodynamics And Other Things Best Not Discussed At Dinner Parties


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For the sake of argument we could say that "wealth" is the individual's ability to escape from the forced element. The more "wealth" you have, the less you have to submit to the force. The more "wealth" you have, the more you can do whatever you fancy without being imposed upon.

Yes, from an individual psyhcological perspective. From the individual POV, wealth divides into two categories - that freedom from co-ercion and insurance against ultimate disaster (the "libertarian Titanic" scenario in which access to lifeboats is allocated according to wealth - and with a limited number of lifeboats you can never have enough wealth because lifeboat-access is about relative wealth).

These two aspects are the 'time dimension' of wealth - future looking. Then the other aspect is consumption which is equivalent to the capacity to reliably dissipate energy at a certain level every day.

All humans and all lifeforms that adap to environment changes essentially would measure their wealth this way, because they must compete.

At the whole civilisation level we need to define wealth purely as the net low entropy configuration of matter that exists - everything from skills, housing, means of production etc, all added to the endowment we have from nature which is the sum of the solar gradient and stored fossil and atomic fuel. This civilisational wealth is the lifeboat.

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Yes, from an individual psyhcological perspective. From the individual POV, wealth divides into two categories - that freedom from co-ercion and insurance against ultimate disaster (the "libertarian Titanic" scenario in which access to lifeboats is allocated according to wealth - and with a limited number of lifeboats you can never have enough wealth because lifeboat-access is about relative wealth).

These two aspects are the 'time dimension' of wealth - future looking. Then the other aspect is consumption which is equivalent to the capacity to reliably dissipate energy at a certain level every day.

All humans and all lifeforms that adap to environment changes essentially would measure their wealth this way, because they must compete.

At the whole civilisation level we need to define wealth purely as the net low entropy configuration of matter that exists - everything from skills, housing, means of production etc, all added to the endowment we have from nature which is the sum of the solar gradient and stored fossil and atomic fuel. This civilisational wealth is the lifeboat.

Not so.

Wealth to each indidivual in a coercion free environment is stuff that you value for itself or that other people value for the thing itself.

All wealth is present, a current opinion - the past is not binding and the future is not set. See hula hoops and yo yos' for details.

As for "must compete"? Only if forced to. That can be environmental, but not these days, these days it's all human system designs (I suspect that psychologically many cannot let go off scarcity thinking.)

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Inflation, growth, and redistribution are all elements that lead to this similar results? Can we suggest different outcomes for all three or do they all lead back into the same oscillating cycle?

That passage above should have read "very UNlikely to be captured by the subsidised poor". Probably you workd that out yourself.

As to your question, let me define growth as an increase in the aggregate energy dissipation/consumption of the society in question over time. Note that this says nothing about per capita energy consumption. The aggregate energy consumption could grow while the individual becomes worse off, and could in that case support positive rate of return to those who own the required assets for production and living. This is normally always a sign of exhaustion of resources, as we see now and as happened in the high middle ages.

Like I said in my prior response, its impossible to define civilisational wealth as anything but the ability to reliably dissipate energy and thus maintain the low entropy configuration of the whole, and to further lower its entropy - at the expense of the universe/environment. We could perhaps define that civilisations resilience to unexpected shocks like a plague or a sudden resource depletion, as being analagous to the individuals wealth serving to insure the individual against unexpected shocks.

While I don't intend to answer your question directly right away, let me pose a different way of thinking about the question. Since our cities, roads, collective scientific knowledge, insitutional and cultural structures etc, all outlive us as individuals, we could perhaps discern these things as the emergent structures that own US, rather than the other way about, just like individual cells in our bodies "own" their mitochondria - we never think of mitochondria as the 'top dog' an cellular biology!

Cities and corporations and nations follow similar patterns of scaling to various life processes as okaycuckoos video post explained. As the video also states, cities very rarely ever fail completely. The evolution of these macro structures dominate economic life, and we don't have control over them, rather, they control and constrain us. And the evolution of these structures is driven by energy.

So in terms of long cycles, we need to start with the dominant emergent structures rather than the individual. When thinking about inflation, redistribution and growth, we should ask what activities benefits these macrostructures and causes them to grow and be insured against future shocks, and then look at what that means individually for us little mitochondria-persons who busy about grooming and adding to these macrostrucures like urban landscape, states, corporations etc.

As a last point, money is just information. Information known by all has no value to the individual in their competition with others but has considerable value in the civilisational whole. We all know what a tenner will buy today so that confers no advantage to us individually. But in terms of the whole, the fact we all have this common understanding about such a thing is vital to maximisng economic activity and thus growing these emergent structures. Inflation and redistribution are ambiguous terms (e.g. redistribution of matter, energy, information or money) and need to be tightly defined before anything defintive could be said or claimed about them. How would you define them?

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Inflation and redistribution are ambiguous terms (e.g. redistribution of matter, energy, information or money) and need to be tightly defined before anything defintive could be said or claimed about them. How would you define them?

Don't know really. Redistribution would be deliberate flattening out of the inequality distribution I suppose. In flation is the hardest to comprehend.

I am very happy with the idea of cities etc. as emergent structures "evolving" and "using" humans as their tools. (fits in with ideas of memes and temes).

On the other hand how does the end of the Roman Empire fit in with this energy-driven analysis?

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Don't know really. Redistribution would be deliberate flattening out of the inequality distribution I suppose.

Which implies I think, deliberate smoothing of the energy dissipation paths of the population doesn't it?

In flation is the hardest to comprehend.

Yes it means different things to different people. I think the propensity for different kinds of inflation very much depends on the structure of society, the technologies employed and whether the society in question is in some kind of technological and energetic steady state or whether it is going through a significant transition in terms of energy/technology.

I think inflation is most usefully understood as an excess of genuine demand over capacity to supply.

I am very happy with the idea of cities etc. as emergent structures "evolving" and "using" humans as their tools. (fits in with ideas of memes and temes).

On the other hand how does the end of the Roman Empire fit in with this energy-driven analysis?

The resilience and complexities of emergent structures must be correlated with the general energy surplus above the subsistence level required to sustain the underlying human population. In Roman times the emergent structures were of a level of complexity correlated to the surplus the empire could sustain at the time. Many of the emergent structures died when the energy flux through the Roman Empire declined as a result of outside invasions. Some Roman cities died off and some didn't. Londinium survived.

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Yes it means different things to different people. I think the propensity for different kinds of inflation very much depends on the structure of society, the technologies employed and whether the society in question is in some kind of technological and energetic steady state or whether it is going through a significant transition in terms of energy/technology.

I think inflation is most usefully understood as an excess of genuine demand over capacity to supply.

Problem - there is no demand for fiat money.

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Which implies I think, deliberate smoothing of the energy dissipation paths of the population doesn't it?

Yes I think so!

I think inflation is most usefully understood as an excess of genuine demand over capacity to supply.

Most times people talk about inflation they are talking about monetary inflation - so you could see this as an excess of money in the system relative to the supply and demand of stuff - that's three things to consider though.

(Of course there is demand for fiat money - offer anyone a £10 note and report back on what percentage refuses or accepts...)

COuld we discuss inflation through energy use - how much energy are we prepared to burn to get the stuff we want?

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Yes I think so!

In which case, in terms of energy dissipation there is good evidence from the natural world that there are natural configurations that maximise energy dissipation, and they tend not to be smoothe. The upshot of that is that smoothing reduces total energy disspation potential which implies a fall in aggregate welfare.

Most times people talk about inflation they are talking about monetary inflation - so you could see this as an excess of money in the system relative to the supply and demand of stuff - that's three things to consider though.

People concerned with inflation tend to look at the loss in purchasing power of one dollar while ignoring the fact that nearly everyone uses bank debt as money rather than the underlying which has tended to have had an inflation adjusted positive real rate of return. So despite the loss in dollar purchasing power since the early 20th century I don't observe that much 'monetary' inflation.

(Of course there is demand for fiat money - offer anyone a £10 note and report back on what percentage refuses or accepts...)

Don't feed the troll.

COuld we discuss inflation through energy use - how much energy are we prepared to burn to get the stuff we want?

There are three key components to monetary inflation, and only one is determined by energy. The credit inflation of the last 60 years is less about energy than it is about institutional stability. In a fiat money world, fiat money quantity is unlimited so some other finite quantity must come to dominate real economic activity. The limiting factor is the ability of the private sector to bear debt at the zero bound of interest rates - peak debt. Peak debt is what primarily constraints the money economy now, and its not surprising that we hit the limit quite fast. Print more money and you just get lower rates and slower moving money. So peak debt is a binding constraint on credit expansion in both real and nominal terms.

So lets assume the credit expansion is more or less a busted flush and the money multiplier is close to zero. Now, inflation woud be driver by the two remaining factors of money creation (government deficits and CB money creation), and energy. Falling aggregate energy consumption will drive prices slowly higher via scarcity, and moderate deficits will grind prices higher via money expansion. Recall that government debt is money, there is no useful distinction relevant to the price level.

Either way credit could only be a cyclical factor at fairly high frequency - lots of mini boomlets and bustlets but nothing like the scale we have seen previously.

Converting private credit to money can only maintain the peak debt status quo but can't re-ignite credit expansion.

So we have a zero sum game, but in the context of a money system which is still not zero sum thanks to money printing whether CB money or deficits. So what happens then is that unextracted fossil fuel and other stocks of free energy become the store of value to as to reflect the actual zero sum (or negative sum) reality. We already have a case where oil and commodities are becoming financialised, and the phenomenon of pre-paid contracts. THis is where investors pay up front for delivery of resources which have not yet been extracted - often dated quite far into the future. These contracts may be private or mediated between nations.

Then if saving desire outweighs consumption desire (at this point borrowing desire is essentially overwhelmed by saving and consumption needs), the pre-paid contract is rolled over and the resources that collateralise the contract remain unextracted, less the costs needed to keep the extraction facility in working order.

This is already happening, see recent posts on FTAV for example. So the market gradually internalises previously externalised costs, foremost of which is the depletion of natural resource stocks. This evolution will increasingly constrain not only government finances but also the return which investors (who will increasingly vanish in favour of those who merely wish to defer consumption at any cost) can expect.

http://ftalphaville.ft.com/2013/02/12/1382532/a-physical-vs-forward-commodity-market-disconnect/

http://uk.reuters.com/article/2013/02/13/rosneft-china-idUKL5N0BD74N20130213

So in summary, imagine that all dicovered stocks of fossil fuel (and EROI viable alternatives) become the new store of value and first choice of collateral. How the medium of exchange evolves under such circumstances is more difficult to predict. But either way, the financial and the real converge. Central bank staff will be replaced with the staff who manage the nations free energy reserves.

And then yes, the calculation is whether energy is worth burning or not for a given outcome. And that, in many ways, is far scarier than a central bank deciding what the nominal number the MV=PQ equation ought to yield.

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In which case, in terms of energy dissipation there is good evidence from the natural world that there are natural configurations that maximise energy dissipation, and they tend not to be smoothe. The upshot of that is that smoothing reduces total energy disspation potential which implies a fall in aggregate welfare.

yes, OK.

And then yes, the calculation is whether energy is worth burning or not for a given outcome. And that, in many ways, is far scarier than a central bank deciding what the nominal number the MV=PQ equation ought to yield.

Why is that scarier? Isn't it more sane and realistic?

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Why is that scarier? Isn't it more sane and realistic?

Well it depends on perspective. At least some MV=PQ nonsense leaves the value of various things open to the subjective interpretation of individuals thus allowing choice.

If your existence and access to the required to perpetuate your existence becomes more closely aligned in the eyes of others with the very exact outcomes of your own energy dissipation choices (which by definition remove resource access from others) then individual capacity to value things becomes diminished and replaced with a quite mechanical and brutal collective energy accounting.

From a societal efficiency and survval POV it makes a whole lot of sense. In terms of individual psyche and mental health it may present problems. In particular, if your choices can be very exactly measured by say, a smart meter, then this provides a much more realistic and precise measure of your activity, and constraints upon it, than does your bank account today.

The question is really related to who controls access to the unextracted resources and dispenses permissions to extract and dissipate them, and what algorithm they run to grant or deny access.

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Well it depends on perspective. At least some MV=PQ nonsense leaves the value of various things open to the subjective interpretation of individuals thus allowing choice.

If your existence and access to the required to perpetuate your existence becomes more closely aligned in the eyes of others with the very exact outcomes of your own energy dissipation choices (which by definition remove resource access from others) then individual capacity to value things becomes diminished and replaced with a quite mechanical and brutal collective energy accounting.

From a societal efficiency and survval POV it makes a whole lot of sense. In terms of individual psyche and mental health it may present problems. In particular, if your choices can be very exactly measured by say, a smart meter, then this provides a much more realistic and precise measure of your activity, and constraints upon it, than does your bank account today.

The question is really related to who controls access to the unextracted resources and dispenses permissions to extract and dissipate them, and what algorithm they run to grant or deny access.

True. But isnt that the point, that slack in the system is wastage, and therefore part of the inflation?

Also with technological development doesnt it get inevitable?

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Yes that's right.

Probably.

Sorry my replies are short - I'm taking it all in but dont have much time to type long replies even if I can think of intelligent points to raise!

I like this whole line of thinking. In some ways it all seems simple but in other ways it is utterly unclear - until explained at great length and then it is simple again...

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Sorry my replies are short - I'm taking it all in but dont have much time to type long replies even if I can think of intelligent points to raise!

I like this whole line of thinking. In some ways it all seems simple but in other ways it is utterly unclear - until explained at great length and then it is simple again...

No problem. Let me ask you a simple question.

Why is it that you are are disposed to accept the argument I have offered? I like to think I have set out a logical sequence of assertions, you have asked some questions and had answers, and are mostly satisfied with them.

Yet you are the exception to the rule.

Can you help me by helping me to understand what it is I have said I have said, or perhaps some state of mind or prior bias you may have had, or some prior investigation you did yourself, or maybe some general dissatisfaction with alternative explanations of events you had harboured that means that you broadly accept what I am saying?

I'd really appreciate your feedback on this.

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No problem. Let me ask you a simple question.

Why is it that you are are disposed to accept the argument I have offered? I like to think I have set out a logical sequence of assertions, you have asked some questions and had answers, and are mostly satisfied with them.

Yet you are the exception to the rule.

Can you help me by helping me to understand what it is I have said I have said, or perhaps some state of mind or prior bias you may have had, or some prior investigation you did yourself, or maybe some general dissatisfaction with alternative explanations of events you had harboured that means that you broadly accept what I am saying?

I'd really appreciate your feedback on this.

Hi, thanks, an interesting question! Hard to answer though!

I studied physics at University, also pure and applied mathematics at A level, also been interested in history to a fairly high level. In my university physics course the bit I found most interesting was the course on statistics and experimental errors - discussing spreads of results from nominally identical experiments, turning an understanding of the accuracy of a measurement into a meaningful real-world statement about the thing being observed.

Also when I was at University I used to read the Sherlock Holmes original stories a lot!

Also since then I have been influenced by Susan Blackmore's work on memes, her book "the meme machine" is pretty good (I also like her work on consciousness though I'm not sure how relevant that is!)

Also I have read a lot of this forum since a bit before the 2008 crash and I like the ever-questioning cynical analysis of taboo or conventional wisdom or vested interest subjects you get on here.

Perhaps this is the thing, people generally have vested interests in their own world-view, and it is dangerous to think outside the box. Tribal loyalties etc. I am thinking more and more that tribal loyalties are a real barrier to rational argument, and so perhaps the best way to work is not to fight them and not to rely on them but to exploit them.

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Hi, thanks, an interesting question! Hard to answer though!

I studied physics at University, also pure and applied mathematics at A level, also been interested in history to a fairly high level. In my university physics course the bit I found most interesting was the course on statistics and experimental errors - discussing spreads of results from nominally identical experiments, turning an understanding of the accuracy of a measurement into a meaningful real-world statement about the thing being observed.

Hmm, I find that slightly depressing - thus far only people with some educational background in physics or biology can seem to get the relevance of what I am saying. Its similar in economics in a way - most people fall back on popular wisdom (aka 'modern religion') or simple intuition and will do so even if the relevant facts are easily accessible. I'm not actually a scientist myself, and what physics I do know beyond the semiconductor physics I learned at university is self taught. So it can be done but its a big ask.

However the general level of scientific illiteracy is alarming, even more so than the economic illiteracy.

In most cases it should be sufficient I would have thought to just have read some decent popular science books on entropy, complex systems or something to get a handle on what I have said in this thread - would you agree, or not?

Also when I was at University I used to read the Sherlock Holmes original stories a lot!

Also since then I have been influenced by Susan Blackmore's work on memes, her book "the meme machine" is pretty good (I also like her work on consciousness though I'm not sure how relevant that is!)

What does she say about conciousness?

Also I have read a lot of this forum since a bit before the 2008 crash and I like the ever-questioning cynical analysis of taboo or conventional wisdom or vested interest subjects you get on here.

Perhaps this is the thing, people generally have vested interests in their own world-view, and it is dangerous to think outside the box. Tribal loyalties etc. I am thinking more and more that tribal loyalties are a real barrier to rational argument, and so perhaps the best way to work is not to fight them and not to rely on them but to exploit them.

I agree with your last point. And again, that is the point of religion - to communicate important truths that have real world relevance to useful social and individual action but in a moral/emotional framework rather than in a numeric/scientific/rational framework, since the vast majority of people only operate in the former mode (even while they may think they are actually being rational, what they are actually doing is repeating conventional wisdom).

Herein lies my challenge, I think.

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Hmm, I find that slightly depressing - thus far only people with some educational background in physics or biology can seem to get the relevance of what I am saying. Its similar in economics in a way - most people fall back on popular wisdom (aka 'modern religion') or simple intuition and will do so even if the relevant facts are easily accessible. I'm not actually a scientist myself, and what physics I do know beyond the semiconductor physics I learned at university is self taught. So it can be done but its a big ask.

However the general level of scientific illiteracy is alarming, even more so than the economic illiteracy.

In most cases it should be sufficient I would have thought to just have read some decent popular science books on entropy, complex systems or something to get a handle on what I have said in this thread - would you agree, or not?

I dont know, I have never read such a book (and the thought of it fills me with dread!) Perhaps it's more a fundamental attitude thing.

What does she say about conciousness?

http://www.susanblackmore.co.uk/Books/VSI/vsi.htm

I really recommend this VSI book, it is very accessible and summarises most of her ideas.

Her textbook http://www.susanblackmore.co.uk/Books/Consciousness/2Ed/index.htm is a lot more complete and hardcore

Basically the idea is of consciousness as an emergent property of complex systems. The working method seems to be asking awkward questions and throwing away preconceptions...

I agree with your last point. And again, that is the point of religion - to communicate important truths that have real world relevance to useful social and individual action but in a moral/emotional framework rather than in a numeric/scientific/rational framework, since the vast majority of people only operate in the former mode (even while they may think they are actually being rational, what they are actually doing is repeating conventional wisdom).

Herein lies my challenge, I think.

Was it Sagan who talked about a new religion that draws on the wonders of scientific rationalism?

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Cheers.

Was it Sagan who talked about a new religion that draws on the wonders of scientific rationalism?

I didn't know that but I do now! Here's the quote:

“How is it that hardly any major religion has looked at science and concluded, “This is better than we thought! The Universe is much bigger than our prophets said, grander, more subtle, more elegant?” Instead they say, “No, no, no! My god is a little god, and I want him to stay that way.” A religion, old or new, that stressed the magnificence of the Universe as revealed by modern science might be able to draw forth reserves of reverence and awe hardly tapped by the conventional faiths.”

The trick is of course, to translate the science into simple parables, morals and so forth, for a 21st century audience.

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Perhaps we can address "The history of economic growth and banking as evolving entropy maximisation processes" - growth would fit in with what we were just talking about a bit?

OK. So entropy maximisation refers to two different things.

One is what we can call MaxEnt, which is:

"The principle of maximum entropy states that, subject to precisely stated prior data (such as a proposition that expresses testable information), the probability distribution which best represents the current state of knowledge is the one with largest entropy.

Another way of stating this: Take a precisely stated prior data or testable information about a probability distribution function. Consider the set of all trial probability distributions that would encode the prior data. Of those, one with maximal information entropy is the proper distribution, according to this principle."

Applying that to distributions within complex systems, the rough reasoning as to why a complex system would settle on distributions which maximal information entropy distributions is that such distributions encode as little information about the past as possible, thus remaining open to the widest range of possible future events.

The other one is 'maximum entropy production principle' (MEPP) , which is describing something different, but maybe related,

"In thermodynamics, the principle of maximum entropy production states that irreversible processes proceed in a direction in which the maximum amount of entropy is produced or that in which entropy production is greatest. German biogeochemist Axel Kleidon, a promoter of the theory, defines the principle of maximum entropy production as a theorem which postulates that the steady state of open thermodynamic systems with sufficient degrees of freedom are maintained in a state at which the production of entropy is maximized given the constraints of the system."

So one is a statistical tool, and the other is a prediction about the evolution of physical systems. Neither are proved, both are contested and evidence for both exists. In particular MEPP is proposed as the reason life exist - to reduce gradients and produce entropy fater than would be the case without life. It is in my view a more general explanations than Dawkin's selfish gene notions, and has considerably greater explantory power.

If all that makes sense, we can move on to the next bit.

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No, sorry, lost me at the 3rd paragraph!

This:

Applying that to distributions within complex systems, the rough reasoning as to why a complex system would settle on distributions which maximal information entropy distributions is that such distributions encode as little information about the past as possible, thus remaining open to the widest range of possible future events.

A couple of typos in the above. It should say:

Applying that to distributions within complex systems, the rough reasoning as to why a complex system would settle on distributions which maximise information entropy is that such distributions encode as little information about the past as possible, thus remaining open to the widest range of possible future events.

In finance, this would roughly translate to having the best possible hedging of ones current portfolio - e.g. you make no assumption about future asset prices. And in fact, maximum entropy models are used for hedging. But of course, garbage in, garbage out.

If you did wish to take a view, by definition you would deliberately have imperfect hedging so as to benefit from your expected future coming to pass. With perfect hedging, you can react faster to new information because you don't need to liquidate bad bets before acting. Of course to some degree leverage could permit you to double down.

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Thanks but I meant this one (plus all subsequent ones...)

"The principle of maximum entropy states that, subject to precisely stated prior data (such as a proposition that expresses testable information), the probability distribution which best represents the current state of knowledge is the one with largest entropy.

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