(P&I) The Process & Economics

Energy, Mass and Entropy
The Entropy Increases But Mass And Energy Are Conserved

Essay. The Process is an inescapable fact of not only economics but the world that we live in and if whatever we’re doing relies on counting and a conservation law then The Process is a boundary condition and it needs to be explained.

But all that we have is “counting” because nothing exists outside of the rational numbers and the real numbers are a creation of mathematics laboriously articulated as the “Dedekind Cuts” (1859) which fill in the holes, so to speak, and the “conservation law” is mathematics itself which is the “conservator” of such a construction and assures its consistency even though said “consistency” cannot itself be proven (Gödel 1933).

And we need to be careful because just one mistake could bring it all down.

How economics fills in the holes.

Thus the reason that economics is such a failure in describing the “economics” that we practice is that the economists seldom (charitably as opposed to never) bother to “fill in the holes” and as a result we have an economics which they practice and which they profess and for which we pay them but which doesn’t work and doesn’t mean anything but is words with no provable meaning.

For example, all of mathematics is built on the demonstration that 0≠1 but any trickster can show us that 0=1 by arguing as follows: if a=0 then obviously a×0=0 and 0=a×1 and hence, a×0 = a×1 and cancelling or dividing by a on both sides, 0=1 QED.

Goldbach Conjecture 1742

And having established that fact, economists who are the consultants to governments and policy-makers then go further and say, well, isn’t it obvious that every even number is the sum of two prime numbers? There are no exceptions that we know of and none with probability one, they say QED.

However, we should not expect a change in economics until the economists do; in the meantime, we can rely on them for statistics but not their conclusions – with probability one we say.

For more applications of these concepts please see our Posts which rely on a Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the societal norms of risk aversion and bargaining practice.

And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

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