December 30, 2021
Gauge Theory, Gold, and Bitcoin | The Weinstein Series | Episode 1
Checkout the What is Money episode page and show notes
Key Takeaways
- In essence, Gauge theory is a fancy way to say differential calculus where rise over run is measured from a reference level that is set internally within the theory
- In ordinary calculus, you have one reference level, in Gauge theory, you scale both the function and the derivative.
- The ruler of prices is goods, the ruler of goods is prices, both rulers are moving around and we call the measurement devices price and quantity indexes (CPI, GDP, etc.)
- The Marginal Revolution in economics mistakenly uses ordinary calculus. However, all of economic theory is a naturally occurring Gauge theory that has not been recognized.
- An important problem with Keynesian economics is trying to describe a physical system where human interference heavily impacts how the system behaves
- In that sense, all analysis and equations are just guesses and modeling of how central bankers behave
- Keynesian or not, a monetary system isolated from competition invites the least competent and most corrupt to control an economy
- Satoshi effectively moved the physical world into the logical world by creating locally enforced conservation laws. However, the problem is having a blockchain recording everything permanently.
- Consider this, who would want a new form of gold that is constantly recording and announcing its transaction history?
- Beyond money, imagine porting rules of the physical world into the logical world. For instance, storing genes in a cell or on a hard drive, and creating one from the other
Intro
- Eric Weinstein (@EricRWeinstein) is a mathematician, cultural commentator, and managing director of Thiel Capital
- Host: Robert Breedlove – (@Breedlove22)
Introduction to Gauge Theory
- In mathematics, derivatives measure rates of change. Thus, something is constant if its derivative is 0, in other words, it’s not changing
- Covariant differentiation is a graduate school mathematics concept whereby you don’t only have multiple functions to consider, but multiple derivatives.
- This reflects the real world that has many changing variables
- Covariant differentiation is a graduate school mathematics concept whereby you don’t only have multiple functions to consider, but multiple derivatives.
- Gauge theory: you don’t have a universal reference level (imagine a carpenter’s level). There is no set concept of the reference level where you measure the rise from
- In ordinary calculus, you have one reference level, in Gauge theory, you scale both the function and the derivative.
- Explained differently: Gauge theory is a fancy way to say differential calculus where rise over run is measured from a reference level that is set internally within the theory
- General relativity introduced the idea that measurement devices (rulers and protractors) can vary from place to place
- The insight in Einstein’s field equations was to allow the measurement devices to become a dynamic part of the system
- By contrast, in special relativity, once you set the measurement devices in one point in space-time, every other point in space-time inherits the same devices.
Gauge Theory in Economics
- The ruler of prices is goods, the ruler of goods is prices, both rulers are moving around and we call the measurement devices price and quantity indexes (CPI, GDP, etc.)
- In other words, Prices are ratios of exchanges expressed in money and they enable economic calculation.
- Wittgenstein’s ruler: ‘Unless you have confidence in the ruler’s reliability, if you use a ruler to measure a table you may also be using the table to measure the ruler.’
- The Marginal Revolution in economics mistakenly uses ordinary calculus. However, all of economic theory is a naturally occurring Gauge theory that has not been recognized.
- Eric predicts that “Every serious client of the ordinary differential calculus will become a client of Gauge theory within say a 100 years”
- Moreover, it’s backward compatible, anything you could do in the old differential calculus you can do in Gauge theory
- In Chapter 8 of The Physics of Wall Street, author James Owen Weatherall discusses Gauge Theory and how it applies to financial markets.
Ordinal vs Cardinal Utility
- The Marginal Revolution defied the view that individual objects have quantifiable intrinsic values. Instead, it argued that all value is subjective to market actors ordinal preferences
- A case in point is the declining marginal utility of money: dollars you earn while poor provides greater utility than those you earn as a millionaire
- In the St. Petersburg paradox, a player plays a game of flipping a coin where the expected return approaches infinity, yet there is a 50% probability of zero outcome, should they keep playing?
- Bernoulli’s solution explains that when summed, the cardinal value doesn’t result in infinite returns
- In other words, people value the remote possibility of huge pay-outs less than the likelihood of getting nothing from the game
- Economics is based around a series of bundles and derivatives that make it one of the most beautiful geometric theories that can be encountered outside of pure maths and physics
- However, “There is not even a generally competent group of economists to review the claim” – Eric Weinstein
Competition is Critical for Scientific Progression
- Austrian economics is based on Praxeology, compared to Keynesian economics which relies on mathematics and analytics
- An important problem with Keynesian economics is trying to describe a physical system where human interference heavily impacts how the system behaves
- In that sense, all analysis and equations are just guesses and modeling how central bankers behave
- “In essence, I understand that the field doesn’t want to acknowledge that it doesn’t know what it’s doing, but it doesn’t” – Eric Weinstein
- An important problem with Keynesian economics is trying to describe a physical system where human interference heavily impacts how the system behaves
- Keynesian economics may aim to prevent economic seize-ups, but in the process, it gives a select few the right to play God. Even worse, it attacks people instead of addressing claims.
- Keynesian or not, a monetary system insulated from competition invites the least competent and most corrupt to control an economy
Gold as a Gauge Theory
- A free market naturally seeks the most invariant money to express prices and perform calculation, that is to say, minimizing the derivative
- Gold became superior money because it had the most predictable ratio of rising over run
- Gold 197 originates in rare neutron-star collisions. As a result, it’s chemically stable and we are unable to manufacture it, this is why we use it as money
- Gold’s physical gauge theory shows up in logical gauge theory as a double-spend problem being solved
- Even more, there is no blockchain or record of transactions, gold assaying is the way to verify you have gold
Satoshi Practicing Logical Physics
- Satoshi effectively moved the physical world into the logical world by creating locally enforced conservation laws. However, the problem is having a blockchain recording everything forever.
- Who would want a new form of gold that is constantly recording and announcing its transaction history?
- Can we dream of distributed computing without being entangled with a universal ledger?
- Beyond money, imagine porting rules of the physical world into the logical world. For instance, storing genes in a cell or on a hard drive, and creating one from the other
- “I would like to see the logical world accept a port of the physical world” – Eric Weinstein
