I've been pretty hard on economists lately. I've just finished writing this paper. It is a complete rewrite that formalizes the connection of utility to entropy. I added two parts one resolves the Allais paradox and the other looks at US income data.
1/
papers.ssrn.com/sol3/papers.cf…
Why I've been so hard is that somebody should have done what I did a long time ago, but alas not all the low hanging fruit has been picked.
What might you ask did I do that was so novel?
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Well I assumed, formally, that an economy is made up of independent and effectively identical people (we behave similarly given similar choices).
Crazy right?
That's my secret sauce. There I gave it away.
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But this was enough.
It allowed me to derive microeconomics entirely from game theory, utility and all. What is crazy about this is that this simple little trick resolved the Allais paradox.
This paradox has plagued the expected utility hypothesis for the last 68-years.
4/
And it's gone. But it's more than gone, because the expected utility is entropy and it's constrained by the second law!
That's right kids I replaced one unexplained thing with another... Not really but who understands entropy any ways? Well @johncarlosbaez does plus a few
5/
The second law is so important that Allais saying that it can be violated is laughable. I mean really really bad. Like bad bad. So bad I don't have any nice words bad.
The fact that this wasn't identified by ANYONE since Allais first proposed his "paradox" is sad.
6/
Sad unfortunately is being too kind. It means that as a field economics isn't constrained by ALL the laws of reality, there are 4 incase you're curious.
To give them some credit they did identify the 1st law (the conservation law) as Walras law.
en.wikipedia.org/wiki/First_law…
7/
Of the other 3 the second law is the most important, the others just kind of fall into place.
en.wikipedia.org/wiki/Second_la…
But I wish this was the worst of it. It unfortunately is not.
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While Walras explained the conservation law, what he did not identify was what was conserved, it's not utility (which is entropy). It's value and value is measured by the Hamiltonian.
This is why it pays to be nit picky rigorous, otherwise you'd miss it.
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Hamil...WTF? you might be thinking. The Hamiltonian measures energy. Know what that is? Think it's not important in economics? Just ask Europe how in the hell they are going to do anything much less die this winter. And I mean that literally.
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Ask @AlexEpstein, @DoombergT, or @ShellenbergerMD how important energy is economic activity. If we don't have energy there is not output.
Exergy Input = Economic Output (Walrasian Wealth) + Storage
δQ=δW + dE
This IS the First LAW, name one economist who understands this!
11/
Fine I'll name 2, Robert Ayers and Benjamin Warr. They wrote a good book, one of course that was ignored, e.g. Europe and the rest of the Western world.
amazon.com/Economic-Growt…
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Next is this whole obsession about income inequality. Seriously?! Income inequality is an intrinsic property of the statistics of the world around us. You can't avoid it or make it go away. It is as old as the universe.
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Here is the income distribution That H thingy is the Hamiltonian, the Z is just a normalization constraint (very important seriously).
ß is the inverse temperature. As ß->0 T->∞ and we all become equal. Last time that happened was the big bang if that even happened.
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So when I say income inequality is an absolute property of existence I mean it. To advocate for a policy of "reducing" income inequality only makes us poorer. It doesn't make society better. To advocate that is to advocate breaking the second law. And we know what that means.
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I'm not trying to be callous. The world doesn't care about you, me, or anyone. All that we can focus on is making the lives of those around us better, and this means access to more energy, not less.
As well intentioned as economists are they are not making the world better.
16/
I took a look at US income data from 1996-2019. What I found was this. We have been in a continual money expansion the entire time.
At this point you're thinking, "You f*cking genius, duhh!"
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Well yeah duh, did you know that you can actually measure the amount of wealth extracted from the economy? Of those 24-years, 1 full year worth of work per tax payer has been extracted.
The vertical axis is the value of money and the horizontal axis is the average income.
18/
That red line represents a polytropic process, 1996 was in the upper left 2019 in the lower right.
To an engineer when you see this your heart sinks. We are the gas that has its energy (wealth) stripped away (extracted).
en.wikipedia.org/wiki/Polytropi…
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Anyone and I mean anyone who is telling you that inflation is good is either an incompetent moron or heavily invested in the destruction of civilization and keeping us as slaves. Again not being facetious.
fee.org/articles/the-t…
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Why am I a #bitcoin maxamilist? Simple. I'm tired of being a slave. You want freedom, separate state from money. There is no compromise in this. Everything else is a distraction. Follow some other maxis educate yourself. YOU ARE BEING PLAYED FOR A CHUMP!! cc @ShaneTHazel
21/
It still gets worse. I wish I could make it up but I can't. While the f*cktards in the Federal Reserve have been treating us like chattel, the jackasses in government have been making it harder for us to do stuff.
Temperature is our individual activity, 1996 upper left...
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That temperature corresponds to the energy we have to act. All of the policy that we have had for the Green New Deal and climate change is quite literally making us poorer by restricting our access to energy and thus our ability to work and provide.
It's only getting worse.
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Hey America we have a choice, it starts this November. We can either wake the f*ck up and demand that we have rational policy: don't let the banks dictate monetary policy #EndTheFed and promote a high energy #nuclear and #FossilFuture or die cold hard deaths.
FIN
Sorry forgot to add a link to where the analysis is so you can see this bullshit for yourselves.
github.com/crabel99/US-En…
Also DM's are open to feed back on the paper at the head of the tweet It's due to the editor Dec 1.
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