Fucking Money, How Does It Work?

1 posts


Arcturus and I were discussion how, exactly, 'price' ends up being one dimensional when utility is clearly a multidimensional thing.

My comment is that path integrals lower the dimensionality of a dynamical system, because there is an extremal principle ('principal of extreme action') that comes into play. How this works for computer performance is shown by Neil Gunther in his book, PPA.

However, in Economics, the phenomenon is known as 'the numeraire':


*Do* notice the reference to the Radon-Nikodym derivative of Stochastic Calculus!

In any event, money, magnets, it's the same subject more or less -- Statistical Physics with a few minor variations to make things interesting.

The general problem of how highly non-linear dynamical systems (like an Economy of Humans) ends up having simple, low dimensional laws like price-driven behaviour -- is quite interesting and practical. It is very non-trivial, highly mathematical, and quite remunerative I might add.

A good place to start is reading about how Auctions (and game theory) and the ' Edgeworth box ' work: the fundamental point is that economic equilibria -- like their statistical-physical cousins, only following from the Game Theory concept of http://en.wikipedia.org/wiki/Nash_equilibrium -- are an ideal approximation, and indeterminate except in a certain limit. Economics (starting from the basics of an auction) are from a numerical/calculus standpoint *indeterminate* -- meaning, there is no one solution to the equations. In the limit of an infinite number of participants, sure. But in the real world, there is still a non-determinant 'core' of an economy -- Google 'core indeterminate economy' for more info.

Economic phenomena are intrinsically stochastic, and only approach the determinism of Natural Laws (low dimensional equations), in various limits, the so called ' Continuum Economy '.

Anyway, if you know Statistical Physics , I'm just repeating myself, albeit in new and interesting ways....

By the way, it really sucks that the CEPA/Newschool site has gone 404 in the last week. Last copy, for the record: http://web.archive.org/web/20080422065959/http://homepage.newschool.edu/het/

In partial compensation, some Neil Gunther quotes...

See also, http://www.despair.com/consulting.html ...