Into the Cool

[pjh]

I was wondering has anyone read this, and does it offer any insights into evolution as Randi is suggestting.

I note that when the authors find they must offer a certain criticism of Richard Dawkins' emphasis on natural selection as the explanation for the observed complexity and long-term regulation of environmental variables, they wisely preface that discussion with ...

I thought that because this is not a closed system, then the 2nd law didn't realy apply, although this statement may not necessarily have anything to do with the 2nd law.

Part of the description on Amazon :
begin by rephrasing the Second Law—as "Nature abhors a gradient"—and proceed to illustrate its relevance to large systems in general. Whether one is considering the difference between heat and cold or between inflated prices and market values, they argue, we can apply insights from thermodynamics and entropy to understand how systems tend toward equilibrium.

This seems like the classic Postmodernist Bullsh*t, take a valid scientific theory and then apply it all over the place (say financial markets) to make themselves look clever.

If it adds a startling insight into evolution then has it been published in a peer-reviewed journal?

I was thinking of buying the book - has anyone read it and should I?

 

[Ziggurat]

I thought that because this is not a closed system, then the 2nd law didn't realy apply, although this statement may not necessarily have anything to do with the 2nd law.

It's not so much that the 2nd law doesn't apply, but that you can't conclude very much from it.

Part of the description on Amazon :
begin by rephrasing the Second Law—as "Nature abhors a gradient"—and proceed to illustrate its relevance to large systems in general. Whether one is considering the difference between heat and cold or between inflated prices and market values, they argue, we can apply insights from thermodynamics and entropy to understand how systems tend toward equilibrium.

This seems like the classic Postmodernist Bullsh*t, take a valid scientific theory and then apply it all over the place (say financial markets) to make themselves look clever.

No, it does make some sense. First off, their rephrasing of the second law isn't bad at all. It's a little fuzzy in the sense that we aren't defining exactly what gradients we're talking about, and there's certainly no rigorous definition of "abhor", whereas the more traditional phrasing (entropy always increases) is actually rigorously defined. But it still works as a fairly good summary of the consequences of the second law. And it does have very direct implications in financial markets as well. For example, let's suppose a commodity has heavy demand in one location and light demand in another location. One might naively think that this would mean that the price for that commodity would be different in the two locations (price being determined by supply and demand). But if the commodity can be easily transported between the two locations, then the prices will end up pretty much the same - markets abhor gradients, so commodities will flow from where they are priced low to where they are priced high until the prices equilibrate (or until the difference matches the cost of transportation). This isn't anything economists aren't already aware of, it's just that people don't usually think about the similarities between such different fields.

If it adds a startling insight into evolution then has it been published in a peer-reviewed journal?

I was thinking of buying the book - has anyone read it and should I?

No idea about whether or not you should buy it. But you probably shouldn't think of this as a startling insight into evolution (I doubt, for example, that this way of thinking about evolution will lead to predictions or explanations that more traditional viewpoints wouldn't also arrive at). It's probably more useful to consider this not as something wholely new, but just an overview of how thermodynamics principles show up in all sorts of other fields.

 

[pjh]

No, it does make some sense. First off, their rephrasing of the second law isn't bad at all. It's a little fuzzy in the sense that we aren't defining exactly what gradients we're talking about, and there's certainly no rigorous definition of "abhor", whereas the more traditional phrasing (entropy always increases) is actually rigorously defined. But it still works as a fairly good summary of the consequences of the second law. And it does have very direct implications in financial markets as well. For example, let's suppose a commodity has heavy demand in one location and light demand in another location. One might naively think that this would mean that the price for that commodity would be different in the two locations (price being determined by supply and demand). But if the commodity can be easily transported between the two locations, then the prices will end up pretty much the same - markets abhor gradients, so commodities will flow from where they are priced low to where they are priced high until the prices equilibrate (or until the difference matches the cost of transportation). This isn't anything economists aren't already aware of, it's just that people don't usually think about the similarities between such different fields

Yes similarities I agree, but I don't agree that 'The 2nd law of thermodynamics has direct implications in financial markets'

I could pick counter examples - take Wealth. There is no general rule that over time wealth evens itself out (Flows from rich to poor - unless you happen to believe in trickle-down economics!)

You could use the 2nd law as a metaphor to explain this aspect of price equalisation, but I fail to see how it offers any insight.

 

[Ziggurat]

Yes similarities I agree, but I don't agree that 'The 2nd law of thermodynamics has direct implications in financial markets'

I could pick counter examples - take Wealth. There is no general rule that over time wealth evens itself out (Flows from rich to poor - unless you happen to believe in trickle-down economics!)

You could use the 2nd law as a metaphor to explain this aspect of price equalisation, but I fail to see how it offers any insight.

First off, wealth equalization is the absolutely wrong thing to look at. That would be closer to saying that energy content equalizes among systems placed in contact. But that's not what thermodynamics says (temperature is not energy, and some cold systems can still contain more thermal energy than some hot systems). In the case where you have identical objects (pricing for commodity items), then you would expect price equalisation. But people are clearly not equivalent actors in financial markets, so even from a thermodynamics perspective, you shouldn't expect wealth equalization.

On one level, yes, you're right that there's nothing here that you can't figure out by other means, and there are probably plenty aspects of economics that aren't ammenable to analogies with thermodynamics. But that doesn't mean that the parallels that do exist aren't still interesting.