Thursday, May 28, 2009

World Saving

World Saving

During the boom, China saved for a rainy day. This now looks wise, but it was only possible because of western countries doing the opposite. We no longer hear Eastern leaders saying that "the West should save, as we do". I guess they've figured out that it is impossible for everyone to save money.

Money is funny stuff. You can't actually move wealth into the future through money. That seems silly, since we do it all the time. However what actually happens is that when you put your $100 in a jar under the bed, then you create a tiny bit of deflation that makes all other dollar holders richer. Then when you take it out and spend it ten years later you cause a tiny bit of inflation that makes all other dollar holders at that time poorer, and that wealth is transferred into your $100 as you spend it. If you doubt this think: is any real wealth lost if the money is accidentally destroyed?

A country can only move wealth into the future through money if it is some external currency. This however puts that country's savings in the hands of that external country, as China has found. And when the amount of money under the bed is in the trillions then the normally prosaic act of getting it out and putting it back in circulation becomes quite tricky. However that may turn out, the relevant point for this discussion is that:
The World as a whole cannot move wealth into the future through money.
And yet there are a number of reasons why the World as a whole should now be doing all it can to prepare for a rainy day. Even though things aren't too flash now, they will get worse on the peak oil down-slope, before we can get the inferior alternative energy sources operational. We need to save.

Saving means doing things now that don't translate into consumption now. This means less consumption now: the very reverse of trying to restart business as usual. 

The simplest thing to do is to stockpile useful stuff that is, or embodies, energy. That's what China is doing now: saving oil and iron ore instead of saving money. But there's another name for that: "hoarding". It is an amazing feat of modern thinking to perceive a simple act of preparing for the future as a negative thing. The explicit value of hoarding oil is that it is much more valuable than the current price: quite valuable enough to justify long term storage costs. The act of hoarding raises the current price. This might annoy current consumers (hence the negative name), but this is something we need to do to sustain the oil industry and postpone a complete collapse of the oil industry and everything else. Of course the cheapest place to store it is to leave it where it is, hence Sarkozy's suggestion of a producer-consumer deal on prices, but this seems likely to be politically impossible.

Another thing to do is to build infrastructure now that will be useful later. There's a lot of infrastructure building going on, but a lot is seriously misguided: like extra freeways. The infrastructure we need is for energy and for electrification of transport. We need to build those things now, even though they aren't justified by current economic conditions. Businesses don't spend money to prevent social collapse: that's the government's job.

Using public transport and occasional taxis is cheaper than owning a car. However, once you have (rightly or wrongly) bought a car, it changes your decision process on transport. You can now undertake trips that wouldn't have been justified previously, based on the marginal cost of using the car. You don't include an allowance for the sunk cost of the car when deciding whether to use it for a particular trip. This brings me to the next point.

Having built our low marginal cost energy plants, and our wonderful double track electrified railway network, then we need to make maximum use of those resources. We need to let the price we charge for them drift low towards the marginal cost (including maintenance), not try valiantly to make enough money to cover our sunk upfront costs. If it was possible to cover those costs as well as the marginal costs then business might have built that infrastructure rather than the government.

So how would we actually do this? The aim is to reduce the amount of consumption for immediate use in order to have money and workers available for the infrastructure costs (and for stockpiling as well). The way to do this would be to follow the model of "War Bonds" during war time, and issue "Energy Crisis Bonds" to soak up money. What such bonds should promise to preserve is their value as a fraction of total national wealth. Since the activities are not designed to be rigorously economically justified, they might reduce total national wealth, and hence the value of the bonds, but people will actually be happy to accept that if it is up front. And indeed we know that national wealth will decline in real terms for quite some time for other reasons. People are actually more interested in keeping their share of the total pie, rather than taking risks to preserve value in absolute terms.

There are other ways of saving:
  • Useful education (small farming?);
  • Relevant research and development (forget going to the moon);
  • Cleaning up environmental problems rather than leaving them to our poorer descendants;
  • Building a low power, mostly text, mostly wireless, free Internet infrastructure for relevant applications (such as education and transport optimization);
  • ...your ideas here...

If the government were to do as I suggest and build energy and transport and provide them cheaply it would undercut businesses trying to deliver these services. Apart from fairness concerns, there have to be serious doubts as to whether governments can make good decisions in these areas. But it seems clear that business perspective is too short term and won't move until too late. The traditional American answer is to provide carrots and sticks for business to move in the directions that government wants. This often seems to combine the worst of both worlds, with poor targetting (e.g. biofuels) and it is very difficult for government to walk the line between too little incentive to do the job and too much granting windfall profits. My feeling is that we need a bit of socialism for a while to have any chance of getting through the Peak Oil downslope to hopefully find the nuclear electricity plus natural gas upslope. Leaving the energy/financial crisis to private enterprise will eventually leave the world's important assets in the hands of a small number of men who are more noted for their ruthlessness than their public spirit.

Even if the details are wrong the fundamental point is right: One of the things we need to be doing is saving and the thing we need to be saving, in various ways, is energy.

Wednesday, May 20, 2009

Free Will

Free Will

Many systems behave with very exact determinism. The circling planets and a sphere rolling down an incline were examples that attracted applied mathematical treatment in the early days of modern science. When it became apparent that humans were systems built from the same stuff as inanimate objects it came to be thought that the behaviour of humans must be exactly determined. If you could know the exact state of the person then that persons responses could be exactly calculated. This was interpreted to mean that people don't have free will.

Then came the quantum revolution. Systems don't have exact state. The state of a system and its evolution are only determined statistically, not exactly. This was seized on by some as restoring free will.. This never made any sense to me.

Instead of mapping out a persons exact future, we can instead only map out the probability of all possible futures. Or if you prefer the multi-worlds interpretation then we can map out all the person's futures and how frequently each occurs. It is a mystery to me why anyone feels that this bestows any more free will than the more exact Newtonian determinism.

The problem of free will comes from the intersection of the ideas of science with the idea of an infinite God. God is envisaged as being able to do infinite amounts of calculation at infinite speeds. If we remove the idea of an infinite God then the problem of free will disappears.

Lets suppose that we wish to solve the problem at the heart of the free will issue. We wish to enter the state of a person into some computing device and extract information about the future behaviour of that person. If a person was as simple as a perfect sphere rolling down an incline then we would expect an easy and definitive result.

One possible way to address the problem is to make an exact copy of the person and follow the behaviour of that copy. Effectively we are using a human as a calculating device giving back information about human behaviour. A key question is: can we do better? Can we build a simpler system which will predict the behaviour of the person. Science now understands the butterfly effect: where in unstable systems small changes to small parts rapidly expand their effect to alter the macro state of the total system. Mathematically we now also understand that most information, such as the information describing the state of a person, is incompressible -- it can't be described by a simpler system.[1]

It thus seems overwhelmingly likely that you can't build a simpler system to determine the evolving state of a person. What this means is that the only effective way to find out what a person will do in a given situation is to put that person in the situation and see what they do. To rephrase that:

Observing what a person does is the only way to find out what that person will do.

To me this expresses the fact that the person has free will. The person's actions are not "determined" in any physically meaningful sense.

There is a problem with this interpretation. It also applies to hurricanes and bacterium. Clearly a hurricane doesn't have free will because it doesn't have will at all. A becterium, like a person, does act purposefully to decrease local entropy. If you don't want to allow that a bacterium has free will then the next step up is to creatures which have specialized cells used for decision processes. It seems unlikely that this is a hard break. Probably as soon as there is some cell differentiation then some cells are more concerned with decision and others less. And from there to people there is no clear cut point where we could reasonably divide those with free will from those without.

Sadly even the break between life and non-life is not that clear cut. Perhaps we are forced to the straight forward view that some things have more will than others. Will is always free will because the extent to which a systems actions are predictable by a simpler system is also the extent to which we would not identify something as really displaying will at all. We thus return happily to the sensible view that prevailed before the imaginary monster of determinism arrived on the scene.

[1] somebody, probably Chaitin, proved "nearly all information is incompressible" or something like that.