History has shown that dogma is most strident as it is on the verge of overthrow. The history of science is a prime example of this assertion. Near the end of the 19th century many physicists lamented the end of physics. A generation later Relativity and Quantum Theory rewrote all the dogma. By the end of the 20th century dark matter, and the accelerating expansion of the universe are doing it again.
Math tells us what could be true, but physics tells us which of these possibilities are actually true. A good physicist knows when it is time to put the math down. Math and Physics have been the dogma from which the modern world was engineered from the medieval fabric that it inherited.
Ever since Isaac Newton published his Principia modern science has taken the river of time as an axiom. Space-time is the Cartesian product of the river of time and the three dimensional world that we live in, observe and measure. Albert Einstein used the Lorentz Transformation from Special Relativity to create a General Relativity in which space and time merge into a curved space-time.
What if this were wrong? What if time is a creation of man to put order into sensory data so that the mind can comprehend the environment? It is not is not a river at all. It does not exist; animal senses have fooled us into creating something from nothing. Could time’s role be that of a parameter, not as a basis coordinate degree of freedom in the physical world? Could there be no space-time only timeless space?
This may not be as bizarre as it sounds. There are no physical measurements of time (of which the author is aware) that are not actually measures of distance. Thus there are no experiments that measure time directly, as it may not be possible. Quantum Theory has shown the impossibility of stopping motion, even at absolute zero.
We mislabel time when we convert a large distance into a small number by inversion. Einstein used the speed of light as the conversion constant. The constant is the speed of light which if measured in angstroms of light is a very large number. Instead we invert that number and call it a second and then fool ourselves into thinking it is real by watching clocks and say the river of time is flowing by when it is just the hands making circles, i.e. motion.
Isaac Newton invented the Calculus in order to understand gravitation. His equations became the basis of Potential Theory from which much of mathematical physics is derived. Schrödinger’s Equation, one of the basis of modern Quantum Mechanics is just a perturbation of the heat equation derived from a potential. Still this is not the place to go into many of the myriad ways popular theories fail us like string theory, QCD with the ultraviolet cut-off, dark matter, and the acceleration of the Hubble constant, etc.
Physical theory is now measured at the edges of knowledge, at the extremes where understanding through mathematics breaks down: just after the Big Bang, near the singularity of a black hole, between entangled qubits. Here the answers from the equations go astray as the mathematics fails. The physics does not fail, because we had a Big Bang, Black Holes with singularities exist, and the Einstein-Podolsky-Rosen paradox of entangled information is measurable.
Perhaps time itself is the problem. Using time as a metric perturbs our equation in to error. If time does not exist then what does the differential ‘dt’ become? That’s easy, it is zero. No point in trying to integrate that. The problem occurs with all the many differential equations with time as an independent variable. They need to be restructured to reflect time’s new role as a parameter and not as a basis.
Julian Barbour is a theoretical physicist trained at the University of Cologne. Unlike the majority of his peers he has been self-employed since graduation. This means he does not have to write peer reviewed papers as a condition of employment. He enjoys the luxury of real academic freedom. It also means that he does not have to adhere to dogma of his peers when publishing. He can write without fear or suppression or repercussion. He is independent of establishment dogma with regard to physical theory. In this respect he is unique.
Dr. Barbour is an expert in translating Russian technical material into English thanks to his fluency in the Russian language. This provides two benefits, the first being that absorption of knowledge during translation from a different cultural and technical organizational background (the old Soviet Empire), the other being academic freedom; both of which may essential to his work.
The first thing that I thought about when I read Barbour’s book The End of Time was not physics but economics. If there is no time then there are no differentials with respect to time. This causes problems for a lot of mathematical econometrics.
I have been very critical of the results of econometric modeling by the central bank here and elsewhere. It has been my opinion for a long time that econometrics is voodoo, a phony act, a sideshow perpetrated by the central bank and their paid shills to make economics have the appearance of an exact science, which it is not! This sideshow masquerades the underlying reality where the body politic and the public fisc suffer from it egregiously.
If econometrics worked then we would never have a recession, depressions would thus be impossible, houses would always rise in value, retirement funds would allow the masses to retire early. Gold as a quaint acronym would have zero value and would be free; we might pave roads with it or build dogs houses out of it. Roast ducks would fly into the mouths of the proletariat who would just have to open their mouths from the comfort of the recliner in front of the big screen flat panel HD television braying Fox News Fair and Balanced.
Wait a minute have I lost my mind? Based on the past few months econometrics clearly does not work. State central planning fails everywhere it is tried. The Soviet Union certainly failed as a model of social organization. The central bank and the fiat currency cause every country that adopt it into a race to bankruptcy. The Soviet Union showed how a very sophisticated technological warfare/welfare state can have a first world military machine and a third world social structure.
This lesson should be attended to by all policy planners. The United States is nearly bankrupt, the stock market has tanked, and multiple major banks have failed and in the process have become explicit vassals of the state.
Clearly by any responsible metric of predictive power econometrics as a science fails miserably. There is no factor in the stochastic equation for something like the Madoff fraud, our current liquidity trap, housing bubble or the outright failure of major industrial concerns. These are human nature injections into the system that mathematics will never be able to describe. Beyond all the stupidity, the criminal, the liars, scams and cheats are misbehaviors of governmental administration. Who would have imagined in the campaign of 2000 that a “conservative administration” with a Republican Congress would go on the largest and most irresponsible spending spree in all of the world’s history?You might guess at it and get lucky, but you cannot model it from principles a priori. Beyond that who would imagine all of the privileged and wealthy aristocrats falling for one of the oldest financial scams around, the Ponzi scheme. These are “stochastic” reasons for the failure of econometrics, beyond Barbour’s timeless space.
Banks, Finance Companies, Mortgage Lenders and Insurance companies have not been the only victims here. Malinvestment the major product of the central bank distorts the economy in many additional ways. General Motors, Chrysler and Ford are on life support with their life blood, and cash pouring out. Maybe the econometrics of building more SUV plant’s was not a good idea, nor was agreeing to pay unskilled labor $73/hour? Call it mal-investment a folly driven by econometrics.
Much of the problems distorting the business climate are from central bank induced shenanigans that perturb the normal economic activity. Housing prices have evaporated along with their equity and the 401K’s that many of us (mistakenly) thought made us rich. You may also have to forget about retirement. Don’t forget to thank your bi-partisan elected officials for that.
Econometrics and the monotonic increase in money supply (liquidity injection) created the illusion was that much of the aforementioned was ever real. The stock market has not lost value; the illusion was that the value was actually there to begin with. The trillions of dollars of wealth lost never existed to begin with because it was an inflationary chimera courtesy of the Federal Reserve Bank.
What we have now is the normal market reaction to malinvestment: liquidation and retrenchment. This is market working, correcting the inflationary orgy courtesy of Alan Greenspan, Congress, the central bank, the loyal vassals and sycophants. The fiat currency has done what the Austrian Economists always said it would, asymptotically approach zero.
To me it appears that all the econometrics were not worth the paper they were printed on (no pun intended). Economics had gotten silly when it started using Riemannian manifolds and such. The proponents of this technology are blindly applying it to real problems and hoping an answer would pop out. Based on the results I would have to say it is not looking very good. Why is this? For starters there is no continuity in economic theory! All economic transactions are discrete; there are no fractional transactions, no time coordinate to integrate differential equations along
I can imagine a world with 1 spatial direction and 3 time directions, I just cannot live there, as a model it would only be good for mathematical analysis, it is not physical in the way our world is physical. The math is good but the physics is not!
Econometrics as practiced by the Central Bank has been a disastrous failure. The current chairman of the Fed Ben Bernanke has written volumes on this crap. So far during his tenure we (US) have raced passed a socialist, negative population growth, decaying Europe in the race to decimating our economy and evaporating all equity. The dollar seems to reach a new all time low against the Euro.
Sure you can take a whole bunch of discrete data points and fit a curve to it and fool undergrads in macroeconomics, but what has that got to do with the economy? It has no value as predictive science.
The economic Humpty Dumpty, fractional reserve banking, central planning, and fiat currency, has fallen off the wall (shoved actually by Greenspan et al). We should not waste any time putting it back together as some kind of Frankenstein patchwork of Federal Programs, public-private ventures, and liquidity injection so that it can stumble around creating more carnage.
Ludwig Von Mises the Dean of the Austrian School of Economics had no use for mathematics in economic theory. He knew it was specious, a facade, not real. Mises knew that economics is a qualitative theory that tells us what will happen, not when. He also knew that social engineers (politicians, judges, bureaucrats) also strive to solve problems by codifying their models into public policy and law. Resources are finite; policy makers desire a maximum return to benefit the citizenry, with a minimum of input (taxation). These variation problems as they are called are alluring models for economists to transpose into their domain. It works for the physicists, why not the economists as well? Thus attempts to rigorize economics via mathematics has been a popular approach for well over a century.
Mathematical models are built to represent the problems and variational approaches are crafted to find the solutions. The calculus of variations has been used and abused by economists over the years trying to find extremal solutions in econometrics. Carl Menger along with many others have gone down this road unsuccessfully.
Ludwig Von Mises set the gold standard for rigorous deductive logic in the field of economic thought. He recognized the problem of mathematical modeling in economics when he wrote about math in the Epistemological Problems of Economics:
“Mathematics has significance in the natural sciences altogether different from what it has in sociology and economics. This is because physics is able to discover empirically constant relationships, which it describes in its equations. The scientific technology based on physics is thereby rendered capable of solving given problems with quantitative definiteness. The engineer is able to calculate how a bridge must be constructed in order to bear a given load. These constant relationships cannot be demonstrated in economics. The quantity theory of money, for example, shows that, ceteris paribus, an increase in the quantity of money leads to a decrease in the purchasing power of the monetary unit, but the doubling of the quantity of money does not bring about a fifty percent decline in its purchasing power. The relationship between the quantity of money and its purchasing power is not constant. It is a mistake to think that, from statistical investigations concerning the relationship of the supply of and the demand for definite commodities, quantitative conclusions can be drawn that would be applicable to the future configuration of this relationship.”
He also said:
“As soon as we introduce a concrete datum in our deliberation on human action, such as the price of a commodity expressed in terms of money, we leave the field of economics and enter that of economic history, even if it be the history of this very last moment.”
Many techniques are available for discrete problems. Economic transactions can be modeled as a network using graph theory. A graph consists of nodes and vertices. The vertices link nodes in a temporal fashion, it orders the past (as long as we use directed graphs). There are no present and future economic transactions since there are no nodes for them. Any economic transaction will always be in the past. Negotiations for a transaction, the pricing relationship, the terms and conditions may occur in the present. When completed the transaction itself is always in the past, even if delivery and payment are in the future. One can plan for the future, and execute that plan when the time comes, but the transaction itself is always history. Time is no longer a basis, it becomes an ordered graph using lattice theory.
Every society that has tried to put mathematical economic theory into practice with the Central Bank, fractional reserve banking and the fiat currency has wound up in the same boat as us: broke, deeply in debt, with a parasitic central state sucking the life out of the body politic, along with staggering deficits. We are all together in this ongoing failed experiment in econometric management of the discrete economy of uncounted billions of discrete transaction.
There is a way out. Listen to Von Mises! Embrace the free market, abolish central banks everywhere and the fiat currency. Privatize everything and gradually lay most federal government workers off and as the economy expands their precious labor will be in short supply, high demand, and thus high wage. They can get jobs like the former auto workers all eventually will. Call all the troops back from overseas and let peace and freedom ring! Things will change for the better and soon. The current disaster can soon be just a bad memory, a hangover of a youthful cultural indulgence in financial promiscuity, and wanton profligacy in silliness.
We are out of time, and that is a good thing, as we wash all econometrics, central planning, social engineering, and federated government away.
Individuals can and will plan for the future. Business will sprout up to employ everybody once the parasite of the federated state is laid to rest, R.I.P.! Let’s vote it out, shut it down and adhere to the Constitution (no differentials with respect to time there).
I have known many entrepreneurs and venture capitalists. I have worked in multiple startup companies and I have never heard anyone say that if we integrate this or take a derivative of that using econometrics as a basis for a business plan. Of course not, because it would be meaningless and would lose money, which is death to the entrepreneur. They cannot afford to dally with frivolity when time is short, and profits are to be made, this is the manna of Human Action and the indication that correct decisions are being made.
Profits are the information theory of Human Action. Yet losses are important as well, they tell you something almost as valuable; that what you are doing is wrong and to stop it before you go broke: a lesson that Federated Governments never learn.
I believe any form of knowledge tools should be available to the private sector. Differential and Stochastic Equations, risk management, field theories, divining entrails and Magic 8 Balls are all tools that have validity in some domains, privately.
Time Series econometrics in the public sector has proven its worthlessness so let us discard it as a paradigm. What humans call time is like a metronome it; keeps the pace of the activity, but like the metronome it is not intrinsic to that activity. I prefer Beethoven when the metronome is not clicking away, it is the motion of the instruments that makes the music, and the metronome is superfluous. So it may be with public sector econometrics.
What I am proposing here is bold. Modern econometrics does not work, the proof is in failed policies of all central banks, Unless we consider bankruptcy as strategy worth emulating.
Time will be gone as a degree of freedom in the economic world to be replaced by graph theory, functional equations and integration, delta functions, lattice theory and path integration. These things work, and do not require time, but that is a story for another day.
In closing let’s remember what George Washington said in 1796 in his farewell address for he is admonishing the future and we are in that future, one and all.
"As a very important source of strength and security, cherish public credit."
Do not destroy the public credit as the trillions of fresh debt are in the process of doing.
Res Ipsa Loquitur
George Giles [send him mail] is an Independent writer in Nashville, TN.