Serendipity. I was reading James Gleick's 'The Information' which goes into impressive depth and breadth on the nature of information while working up an essay for publication involving intellectualism as economic behavior and all the pieces of a puzzle came together.
Mr. Seller has a car. Mr. Buyer wants a car. They negotiate a price and complete a transaction. According to current economic theory they are 'setting' a relative value which can mean no more or less than that they are generating a value. Now let me recast the situation in Information Theory modalities, borrowing from physics.
Mr. Seller and Mr. Buyer are incommensurate systems of different histories, information, and value systems who are entangled by language, monetary system, and quantifying methodology. These entanglements then become the instruments, according to the auction price model, that 'generate' the value of the car. That is not the case.
Given, as Keynes said of the stock market, that 'a stock is worth whatever someone will pay for it', the car is worth whatever Mr. Buyer will pay. However, the relative value of the car as information preexists the transaction or entanglement. It is not 'generated'. It is 'discovered', thereby conserving information.
Auction price is, under these terms, not 'set' but 'discovered'. I think if equilibrium theory practitioners were to mathematically recast their arguments into information theory modalities, they would themselves 'discover' logical errors.
There are only a few books that are timely, important, and good reads. That sort of intellectualism is the subject of my essay in progress. Information Theory is a paradigm shifting discipline and if you know Thomas S. Kuhn's work and have resisted the efforts to trivialize and misuse that phrase, then you will appreciate the impressive nature of Mr. Gleick's tour de force.
Thank you for a wonderful book.
Do good and be well.
Saturday, August 20, 2011
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