AWT and monetary economy

This post is a reaction to recent attempt of Prof. Dr. Lee Smolin to define economy on background of agent model of gauge invariance in article named Time and symmetry in models of economic markets (PDF), which is important for AWT by its consideration of Newtonian physics in explanation of economical models:

"It is apparent that time is treated in a way analogous to one aspect of its treatment in Newtonian physics. In classical mechanics, we say that time has been geometrized or spatialized in that the time coordinate is treated just like one of the other coordinates. Motion in a d dimensional space is treated as a geometrical curve in a d + 1 dimensional space. Following this, it is natural in Arrow-Debreu (model of an economy) to treat time the way space is treated. ... The prices are treated as being set at one time, so that goods to be delivered in the future may have a different price today than the same good delivered today. Making use of this, we can say that time, like space, is treated like just another feature of a commodity."

As a LQG proponent, Prof. Smolin avoids description of multidimensional and temporal aspects of this model. Therefore his general line of reasoning still appears somewhat formal/ad-hoced for me, but it still has a good meaning in the context of AWT, which considers the spatialized definition of time, too. By AWT every concept, including time is just a manifestation of nested gradients of Aether density. Despite wonderstricken irony of some comments, here exists many apparent analogies between evolution of life, inorganic matter or human society, including economy.

For example, we can experience a gradual inflation, which is an analogy the inflation in Linde's cosmology, where it is consequence of gradual increase of vacuum density. This increase corresponds the gravitational collapse of collapsar, whose interior the vacuum appears to be formed. From insintric perspective of observer, formed by density fluctuations of such environment the space-time would expand with distance in accordance to Hubble law. This is not so surprising, because economy is energy density driven, so it can be described by dynamics of particle environment. And the energy spreading in particle environment exhibits a gauge invariance by the same way, like geometry of vacuum and particle fields.


We can illustrate it by formation of monetary economy in context of cosmic inflation. At the very beginning no money existed at all - just the exchange of various kinds of goods. By the same way, like the exchange of gravitons at the very beginning of our Universe. By quantum field theory gravitons are considered as a dual particles, playing a role of both fermions, both bosons at the same time. In primitive communism society the good has played both the role of subject of material exchange, both energetic exchange at the same time.

As the density of energy/goods exchange increased, the system did undergo a phase transition as the result of spontaneous symmetry breaking, which was followed by specialization. A two kinds of particles - bosons and fermions - emerged during inflation by the same way, like the exchange of values has separated into exchange of material gods and exchange of money, i.e. energy and the monetary economic has appeared. As the result, the density of exchange density has increased remarkably inside of human society, because it's quite easy to transfer a big amount of value via money at distance.

Even evolution of monetary economy can be understood as a process of symmetry breaking of goods condensate. The goods in primitive communism society served both like subject of trade, both like subject of exchange by the same way, like gravitons were serving both like fermions and bosons. During evolution of society in Sumerian empire 3500 - 3000 BC has separated into money (a bosons) and a goods as such. Another degree of condensation (a hadronization) of money has occurred under evolution of more complex financial derivatives (stock exchange derivatives, swaps, forward rate agreements, etc.). From this point of view, formation of money and monetary economy evolution is just a repeating of the old well-tried practice of universe, not a human invention at all.

We can see many other analogies here. The exchanging of money is followed by exchange of material stuff or services in free market economy. The falling of matter into gravitating body is always followed by radiation of energy (an accretion radiation, the meteors or radiation of matter in magnetic field of magnetars are similar effects from this perspective). If the exchange of matter isn't balanced by radiation of energy - which occurs typically for very dense bodies with small surface - a gravitational collapse may occur. Now we are experiencing a financial crisis, i.e. gravitational collapse of stock markets of high density of energy exchange, we are saying, the financial market was overheated. This situation can be predicted by appearance of tiny fluctuations, in analogy to luminosity changes of giant bright stars before their collapse. Therefore the particle based theory can serve as a tool for predicting and avoidance of stock market crashes, which makes it significant from practical reasons.

Money should be understood as a mean of value in its abstract meaning here, not as a currency. We aren't exchanging money or goods in fact, but time/energy required for their earning. Which basically means, total value of money cannot exceed man-hours of people, who have produced them under given level of technology. This connection has an important consequences for macroeconomics and further evolution of human society, as we can demonstrate later. The nonlinear ("money are attracting/earning money") and quantum wave aspects of particle models in economy we will dispute later as well.

From AWT model follows, primitive communism society is dual to "laissez-faire" capitalism, they're indistinguishable by the same way like fermion and bosons inside of graviton quantum foam. Free market economy can exist just under strong incubator of government, which carefully removes all weak or strong mutations (a monopolies, for example). Just under these artificial situations market can remain freely driven by supply-demand equilibrium.

Because individuals aren't usually willing to see/pay their global needs, their personal motivations and intelligence compensate mutually like interactions inside of large system of particles. At sufficiently general level the silly particle models can describe market society quite well even under consideration of low number of dimensions. This is partially because free market economy can handle actual prices only, it doesn't reflect future - so it's principally metastable and it undergoes a business cycle by the same way, like perceived evolution of observable Universe.



Therefore monetary inflation is tightly related to central government and legal actions by the same way, like expansion of space-time. Gradual expansion inflation of Universe prohibits the Big Bang event to occur too often, so that intelligent life has a sufficient time to develop in it. By analogous way, to keep free market stable we are forced to allow some permanent dissipation in it - or we're risking a "big bang" event, i.e. market crash. This is usually done both by centrally driven legal interventions of government, both by anti-dumping policy of private companies.

AWT and socioeconomic structures

This post is a reaction to defensive stance of many objectivists, monetarists in particular, which are getting into conceptual troubles with contemporary financial crisis. Aether model of particle density fluctuations enables us to understand the mutual relation of socioeconomic structures, the dual character of communism and free market society in particular. By AWT free market society or "laissez-faire" capitalism, as proposed by some subjectivists corresponds the primitive communism society, which is behaving like thin sparse gas with high degree of symmetry (i.e. the space time of low number of spatial dimensions on behalf of temporal ones). Such particles are moving here rather freely and they're collide mutually via low distance interactions by simple and transparent set of individual probability driven rules.

When population density of such particle system increases, an emergent spontaneous symmetry breaking occurs and the energy/value spreading (i.e. the economy) of this system becomes driven by less or more apparent and global microscopical structures (i.e. (mem)branes of foam), which are obtaining a nested hierarchical structure gradually. When the system becomes sufficiently dense, the scope of foamy structures determines the motion of all particles - participants of this system by totalitarian way.

When social pressure inside of such system exceeds certain limit, a new emergent structure of individual density fluctuations inside of such dense system appears, which is serving as a promoter of subsequent phase transition, so called social revolution, which has often avalanche like character. And the whole social cycles repeats again, until society doesn't exhausts its sources. After then the social transition goes by opposite way back into free market or primitive communism economy.

While the analogy of social evolution and phase transitions is quite apparent, just common ignorance of Aether model has prohibit the scientists to model the evolution of society by easy, general and transparent way. This is the reason, why Aether concept was ignored both left, both right camp ideologies, because no ideology can like ballanced, duality based approach of AWT. It's a pity, as it would help to understand the physical mechanism of social crisis, wars and financial instabilities better. For example AWT explains origin of macroeconomic cycle by limited speed of information spreading through society or it explains wars as a consequence of social gradient in space-time, not just in space: the situation, when some country becomes richer or poor fast is much more dangerous, then stabilized neighbourhood of poor and rich countries. As the result, sociology and economics are still in very rudimentary stage of general understanding of human society, despite of high number of less or more formal models, which are trying to describe their subject locally.

From above model follows, AWT considers communism as a dual case of free market society, because utopistic character of both social systems depends on altruistic belief in human ability cooperate fairly without tendency to abuse system. It means, here's nothing wrong on communism or "laissez-faire" free market economy, with the only subtle, but crucial problem: both theories are ignoring social interactions and the "selfish" tendency of people to follow shortest path of energy density gradient due limited speed of information. As the result, both socioeconomic structures requiring support of high level social structures, i.e. government and their interventions to remain free and stable.

By AWT free market is a boson state of society, based on utopistic belief in human ability cooperate fairly without tendency to abuse system, by the same way, like communism. It's a dual ideology to communism. Paradoxically both they can survive just under adequate care of government - the more stronger, the more superfluous the social relationships are expected to be, so that the ratio of profit and taxes converges to 1:1 with increasing of money density exchange and Lafer curve becomes symmetric. Because people are simply undisciplined and self-seeking individuals - that's all. Therefore the tax freedom day defines well the overall state of macrosocioeconomic evolution.

Here's still subtle spontaneous CP symmetry violation, as the free market exhibits a rudimental set of principal microeconomic rules (the principle of supply and demand equilibrium in particular), while communism is only subjectively driven, which makes it more viable from evolutionary reason. Free market operates with current prices only, it doesn't reflect past or future by itself - so it's principally unstable and it undulates between financial boom and crisis. While these undulations may appear fatal for someone, they can drive the evolution of social system forward, until the external sources of society aren't depleted.

On the other hand, communism is dissipating it's sources by short distance interactions, so it behaves well under low energy density conditions, being more primitive. Centrally controlled system handles better long-term problems, like global warming or the life environment protection, because free market economy cannot evaluate well the price of extinct species, until they're not significant for economy (as a source of cancer cure, for example, or various biotechnologies). From this reason, society evolution converges to mixed arrangement, not pure communism or free market economy, despite of wishfull thinking and occasional propaganda of their opponents.

Now we could ask - whether free market didn't exist a well before the very first government has appeared? Yes, it did - but the energy density of such free market exchange was very low with compare to the present state, so its behavior was analogous to primitive capitalism. Now the civilization has collapsed into rather dense money and energy exchange state, so that the free market relationships can persist in very short distance interactions inside of families and close sectarian groups.

The contemporary financial crisis illustrates clearly, the keeping of bursa and highly derived financial products of advanced economy requires the strong patrolling role of state as well. And who didn't realize it is just an dangerous idealist. Most of political troubles of modern civilization were caused just by ideologies supported by various idealists, both proponents of free market society, both communism. Shooting the fanatics is probably not a really good way to expand tolerance, but we do need to keep pushing.

AWT and free market instability

Professor Johnson explains function of capitalistic economy by the following way:

Income differences tend to increase by mobility in space, skill and knowledge, but differences are not allowed to become arbitrarily large through control by progressive taxes, interest rates, limitations of work hours et cet intended to decrease difference. We understand that this control is necessary; a completely free capitalistic system collapses.

This is fully relevant - though sociology based - view, as the true reason of free market instability wasn't recognized yet. From AWT perspective this instability is of physical nature and it has the very same origin, like the instability of the whole Universe, which is collapsing gradually. This is because the free market with many subjects can be described as a multi-particle system with interactions, which leads to the periodic instabilities inside it by following humorous scheme:



Bursa instability can serve as an illustration of fundamental market problem by most pronounced way, being the most dense phase of market by the same way, like the behavior of collapsars illustrates the behavior of Universe. Free market is always operating with actual prices, so it cannot predict the future well and the information spreading inside of it is always limited, because the concurrent subjects aren't interested about free information exchange very much. Due the limited speed of information/energy spreading the free market is behaving like gradient-driven system (PD controller with time hysteresis), which is principally unstable. With respect to information spreading, the centrally planned market appears much more stable, being over-controlled at the price. This is because centrally planned market requires a boson condensate state of totalitarian society, which dissipates a lotta energy at low level of control. Therefore the optimal market strategy is somewhere between fully liberal and centrally controlled economy.

This is why, we cannot expect, free market will effectively control strategic decisions of society, like the prevention of fossil fuel depletion and/or global warming prevention, because it cannot evaluate risks and assets from long-term perspective, especially when these values cannot be calculated/converted into currency price at the moment of decision. After all, "free market" as such doesn't exist in society, at least from Wall Street Crash of 1929, which has lead into many forms of market regulation by governments and central banks.

By AWT the belief is in equillibrium with rational stance by the same way, like capitalism is in equillibrium with central government and like the longitudinal waves are in equillibrium with transversal waves inside of every multicomponent system/environment. One cannot exist without another. This concept is extended in more details here.