Saturday, 1 November 2008

Philosophical Issues of the Credit Crisis

I am amazed that the credit crisis forces us to consider some basic philosophical issues re informal fallacies, e.g.

  • Kantian unprovable apriori synthetical metaphysical premises--"the world is one credit crisis";
  • Ghostly deus ex machina causation--"the credit crisis has made my train late";
  • Circulus in probando by filthy rich bankers-turned-unelected dictatorial ministers--"this is the only alternative (pay bankers with taxpayers' money) because I know it is worse any other way";
  • dicto simpliciter--"this is a credit crisis because I say so".


The media's game is to get under our skin so that as Aristotle put it, "we become what we perceive." Thus, "I think therefore I am part of the credit crisis." For the media, "the credit crisis is, therefore I, the media, make money".

One way we might protect ourselves from the electronic tsunami of rumour, falsehoods, hearsay and outright frauds by the news pundits and "macro-economists" who happen to work for banks or funds is to gain a modicum of financial literacy and to focus on what might be called "a critique of pure luck".

What is financial literacy? It is basically to understand risk in its dimensions through social time and social space. When you think about it, finance as risk is extremely symmetrical. We can get into a very long and fascinating discussion here. [Beyond the basic slogans, for the social theorists, I will only point to two areas of fundamental fecundity: (1) Group Theory--as defined by the mathematical logicians of the 19th century--from Galois on through Lie, Abel, and used to re-write the physics of the 20th & 21st centuries; and (2) Category Theory--an alternative to set theory which is yet to be applied in social science and law but extremely suggestive--the world as arrows and functors.]

Another way to approach financial literacy is to simply "keep some skin in the game". I would suggest that if the maths are just too boring for you, that you can learn finance viscerally by just trading. As preparation for trading, consider some of the best traders I know are: (1) excellent surfers on real oceanic waves; or (2) shark divers. A fine trader's mentality is found in some of the highest levels of abstraction, e.g. note Pascal's God-bet before he entered enlightened quiessence and Hilbert's enlargen programme on the 10 hardest bets on research programmes in the 20th century.

What is a critique of pure luck? It is the belief that all things are alive. Lots of so-called traditional people think this is obvious--what the cultural anthropologists called "animistic". To update this "animistic urge" into the best of Western thinking and to be a bit more precise (but still unpardonably vague), all things that interact as communicating systems are Von Neumann Universal Constructors--that is, these "things" do just that (what is logically required) to replicate themselves in whatever world they find themselves. These nestled systems give the world its form. This form is not invariant. The only necessary invariant is that material of this world hasn't changed at all for billions of years. [Democritus & Leucippus, et Lecretius RIP.] Physicists tell us this--that the planet Earth is composed of the same atoms (give or take some meteroic and cometal accretions and collisions) since the very beginning over 4.5 billion years ago, and for another googleplex years, the atoms will be the same. Although we might wrongly believe that there has been "progress" since way back then. All there has been is really a "re-arrangement" of form. Socrates is even more right now--we as humans are ridiculously insignificant.

As an exercise for the Von Neumann Universal Constructor, we might consider the credit crisis as a good opportunity to think about what laws are conserved through global crisis or anticipating the dark ages (forget the Depression, that's just too small a wave to bother surfing), in case of the BIG ONE, what is the form of laws that are necessary to re-boot civilization?

Answers should be sent to the New York Times and the Financial Times.

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