Thursday, September 17, 2009

What Issac Newton and Adam Smith missed!

Issac Newton, 18th century physicist, missed something big: that to make something go three times as fast you have to make it go three times as far -- taking nine times the energy. I wondered about this (energy increasing with the square of the speed) for twenty years before some kid on a science fiction newsgroup explained it to me. Didn't feel so dumb once I found out Newton missed it (and two hundred years ago the top physicists of the world were debating it -- they had to conduct experiments!).

Adam Smith missed something that should have been much more obvious -- something that would have been instantly recognized by any 21st century biologist -- that a free market is an (evolved) equilibrium system among equilibrium points -- an evolved organism (plenty robust). Nothing "hidden" about its workings -- other than that there are so many zillions of interactions in a body or a market that we cannot keep track of all of them at once. That does no prevent us from prescribing medicine for our bodies and should not deter us from designing fair and balanced bargaining into an economy with, say, sector-wide labor agreements and/or a much higher minimum wage.

Checks and balance is the thing 18th century Brits on this side of the Atlantic got most right -- in the political sphere. But we forget all about checks and balances when it comes to our MOST IMPORTANT (!!!) economic sphere -- our labor market-- and instead perpetuate a "Voodoo" myth inadvertently created by some guy with an unimaginative name like Adam Smith.

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