Mathematically Defined Crypto-Currencies

There has been a lot of attention on BitCoin of late, and a number of my correspondents have been digging into the topic.

I was looking for some good analogies through which to understand the idea and the dynamics of BitCoin and similar mathematically defined crypto-currencies. This is my first shot at constructing such an analogy.

In this model, I think of the economy (the exchange of goods and services) to be an intricate clockwork mechanism. Everything is connected to everything else. Energy flows through the gears, allowing the machinery to operate at some level of speed and efficiency to move things along.

Any economy, like any clockwork mechanism, has friction. Energy needs to be supplied to overcome the friction, and that energy eventually degrades to heat as the state of the clockwork mechanism evolves over time.

One can improve the efficiency of the machine by applying a high quality lubricant. With a good lubricant, there is less friction, and less energy is needed to drive the machine.

In an economy, money is the lubricant that allows the machinery of commerce to operate efficiently. That’s the function of money: to act as a lubricant for the gears of the economy.

Suppose an inventor devises a super-lubricant that outperforms all current lubrication technologies. What happens? In an ideal world, everyone upgrades to the new lubricant and it soon takes a lot less energy to keep the clockwork machine running smoothly.

What could possibly go wrong?

The problem is that manufacturing the new lubricant is not free. Just as it takes energy to overcome friction, it also takes time and energy to manufacture the super-lubricant. And so there ensues a “gold rush” to manufacture this wonderful new super-lubricant.

Eventually, those who got in the game early end up owning barrels and barrels of this valuable super-lubricant. The problem is, they are not using it to lubricate the mechanism. Rather they are hoarding it because its market value is rising. As a result there is a shortage of lubricant in the clockwork mechanism. The material economy is not yet benefiting from the new super-lubricant because very little of it is being released into the gears of the machine. Most of it is simply being hoarded in privately owned barrels whose value on paper is rising.

But if and when all that hoarded lubricant is released into the clockwork machinery of the real economy, two interesting things will happen. The real economy will operate more efficiently (and that’s a good thing) while the price (or value) of the (now increasingly abundant) super-lubricant will drop. When that happens, the late-comers to the gold rush game will find that they unwisely spent a lot of resources in vain to manufacture or purchase small amounts of the once scarce lubricant that has now become cheap and plentiful.

Does this analogy work? How can it be refined or improved?

Shadenfreude Theatre: The Argument Culture vs the Bohm Dialogue Model

Welcome to Shadenfreude Theatre, hosted by Gastrin Bombesin.

GB: For the sake of forsaking the Argument Culture, I propose a demonstration:
Resolved, the Bohm Dialogue Model is superior to the Debate Model of the Argument Culture.

[Scattered audience applause.]

GB: Speaking for the Bohm Dialogue Model is Moulton, the Schmeggegy Scientist. Speaking for the Argument Culture is Barsoom Tork, Anthropologist from Mars. Let's begin with Professor Tork.

BT: I propose to argue that the Argument Culture, with its classical paradigm of taking a position and defending it with maximum zeal, while simultaneously bashing and trashing one's opponent, is a tried and true practice of Earthling Culture, dating back to the dawn of civilization. Who can possibly argue against that?

GB: Moulton, may we have your response?

M: You'll get no argument from me. [Gets up and leaves.]

GB: There you have it, boys and girls. No argument. Who can argue with that?

[The audience sits mostly in stunned silence, except for some nervous laughter.]

[Gastrin Bombesin also gets up and leaves the building.]

[Barsoom Tork nods approvingly and uploads the finished video to YouTube.]

The Tragedy of Bureaucratic Thinking

"In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely." ~Jerry Pournelle, Pournelle's Iron Law of Bureaucracy

Ever since the dawn of civilization, bureaucratic minds have sought to reduce esoteric theory, insight, and wisdom into a simple set of rules that a modestly educated clerk could administer.

Rulers beginning with Hammurabi of Mesopotamia adopted this divinely inspired goal of reducing all high-minded guidance to a compact set of rules.

Alas, history, science, and modern mathematics have collectively revealed that such a goal is not divinely inspired, but devilishly impossible.

In biblical times, it was the Tribe of Levi who played the role of the bureaucrats who sought to reduce the esoteric wisdom of Torah (the word variously means "theory," "science," or "customary system of guidance") to a finite set (numbering 613 in this case) of rules.

This Legacy of the Levites (Levi Natan) came to be recognized by the esoteric theologians as a subtle mistake that was remarkably hard to explain. It's a (mathematical) mistake having to do with Chaos Theory, which reveals that rule-based systems are inherently chaotic (in the modern mathematical sense of the term).

The esoteric theologians noted this issue by creating the allegory of Leviathan (Levi Natan -- the Gift of the Levites -- but subvocalizing the (mis)leading N in Natan). Leviathan is characterized as an unbridled chaos monster.

And that's what rulesets are. Unbridled sources of chaos.

It's a profound and unsettling insight, to be sure. But it's an essential one to appreciate. For if we wish to craft a graceful system of guidance, we have to do it properly, with properly chosen functions, and not by displacing those crucial functions with a simplistic set of rules.

In a word, rule-based systems are dysfunctional. They do not achieve the goal of a high-functioning guidance system.

Let Facts Be Submitted To a Candid World

The most powerful act any individual can perform is to bear accurate witness.

Two weeks ago, US Secretary of State, John Kerry, stood up to bear accurate witness as to what transpired in Syria, based on his reading of US Intelligence.

So far so good.

Now what?

Now the US — having clearly observed Assad engaging in crimes against humanity — is obliged to act by taking the evidence to the International Court, there to indict and try Mr. Assad and his participating lieutenants on war crimes, under the aegis of International Law.

This is how the US, being a leader among civilized nations and a leader in the practice of the Rule of Law, demonstrates how a civilized nation operates in accordance with the Rule of Law, as it applies to international law governing war crimes and crimes against humanity.

This is how a Nobel Peace Prize Winner demonstrates how state-sponsored violence is answered with non-violence, under the Rule of International Law.

In the words of Thomas Jefferson, “Let Facts be submitted to a candid world.”

Hypothesis Testing 101

However, there is a problem with the US evidence.

The problem is that it doesn't rise to scientific standards for hypothesis testing.

I have no idea which of several competing hypotheses is the ground truth. Kerry says he has evidence to support one of the hypotheses.

But that's not how the scientific method works. In the scientific method, one tries like the dickens to falsify each and every conceivable hypothesis. If one survives unscathed, then it emerges as the most likely one to be accurate.

Kerry has not even mentioned the competing hypotheses. Nor has he revealed the outcome of diligent efforts to falsify them.

For this reason, his claims cannot be relied on to have any scientific validity.

Deeper Analysis

My opinion is that the Null Hypothesis has almost surely been falsified: There almost surely was a release of some chemical or nerve agent in the suburbs of Damascus. It was not a Hollywood movie stunt with fake victims.

That leaves at least three plausible working hypotheses on the table to be subjected to the rigors of the scientific method.

It could have been an attack launched by Assad's own military, as Kerry claims.

It could have been a false flag by one of the rebel factions, as some have suggested.

It could have been an accidental spillage by one of the rebel factions, as Dale Gavlak has reported.

As a (now retired) scientist and science educator, I watched closely to see how well Mr. Kerry adhered to the protocols of the scientific method in his attempt to demonstrate how US Intelligence specialists sought to falsify each and every conceivable alternative hypothesis by rigorous application of forensic science.

Did Mr. Kerry conscientiously adhere to the protocols of the scientific method to ensure that the hypothesis he put forward last week was the sole surviving hypothesis after rigorously undertaking to falsify each and every conceivable hypothesis on the table?

I was frankly alarmed and chagrined to observe that Mr. Kerry substantially departed from the protocols of the scientific method, in much the same way as the government had done in previous historic examples in this recurring pattern.

For reasons not entirely clear to me, the US mainstream media isn't even mentioning the competing hypotheses. It's not a matter of declining to report Dale Gavlak's account for lack of a second source. Whether she had reported it or not, it's still a plausible hypothesis that has to be ruled out. And the US Government owes it to those whom it seeks to convince that they have considered and falsified all such alternative hypotheses, whether the mainstream press or independent press have reported them or not.

In any event, whatever analysis US Intelligence puts forward as their best assessment, it still must be submitted for scientific peer review. I am in no position to examine the undisclosed (classified) evidence, and I have no way of knowing if Kerry is withholding evidence that potentially falsifies the conclusion that he (and the Military-Industrial Complex) favors.

But one thing occurs to me that bears review. Sarin is an oily liquid with a high boiling point. In a conventional airborne attack, the liquid Sarin must be atomized into an aerosol spray at a carefully computed altitude so that the droplets rain down on a circular or elliptical footprint over a populated area. It's a grisly calculus, to be sure, but that's what it takes to ensure that a lethal concentration arrives over the dispersal area. When this is done in accordance with the dispersal models, the expected casualty rate is 90% lethality and 10% survival of those exposed to the atomized droplets.

If Sarin is spilled on the ground, most of the liquid goes into the soil and is not dispersed. A limited amount escapes in vapor phase, where it has to waft in the breeze. If the spill were in an underground tunnel, the fraction that is released as vapor has to travele some distance along the tunnel to emerge at a surface vent to reach civilian population. Dispersal through a tunnel could be aided by a non-thermal blast.

In the suburbs of Damascus, the hospitals reported only 10% fatalities and 90% survival. Those inverted statistics suggest a ground-level spill rather than an aerial dispersal attack.

Ground inspectors doing forensic analysis would be expected to look for evidence in the tunnels and at the locations of surface vents for evidence to support or refute the theory of an accidental spillage. We don't know yet if the UN inspectors gathered any such data to either corroborate or falsify the story of an underground release in the storage tunnels.

I don't really care if it turns out the CW in Ghouta was released by a rocket attack from Assad or by an accidental spillage in the rebel's own storage tunnels.

What I do care about is how well the US adheres to the protocols of the scientific method while resolving which (if any) of the proposed hypotheses are fully consistent with the data, having survived all diligent efforts of falsification, as demanded by the scientific method.

Mr. Kerry simply has not done that. It's possible he accidentally selected the most accurate hypothesis, but it's also quite possible he simply fooled himself by skipping the protocols that would have overturned his favored hypothesis in the event one of the alternate ones were closer to the ground truth.

I simply cannot rely on a government that so blatantly departs from the protocols of the scientific method. Maybe he guessed the correct answer and maybe not, but guesswork is not the method I expect my government to rely on.

The Meta-Question

As I see it, this is not a referendum on who released the chemical agents. As I see it, this is a referendum on whether or not the US subscribes to and adheres to the protocols of the scientific method when examining evidence to sort among all conceivable hypotheses (including the Null Hypothesis) to explain an anomalous observation.

All Mr. Kerry has done so far is to falsify the Null Hypothesis. He has convinced everyone that there really was a release of chemical agents in the suburbs of Damascus; it was definitely not a Hollywood movie stunt faking the story of civilians succumbing to some mysterious deadly agent.

Modern day humans devised the Protocols of the Scientific Method as our most reliable method for sorting out accurate hypotheses from incorrect ones. Politicians, alas, are notorious for declining to rely on the Scientific Method for drawing conclusions.

Will this episode prove to be yet another failure of our government to arrive at the ground truth by a trustworthy method?

Or will this episode mark an historic turning point in our methods and practices for making wise and sensible decisions?

I fear the political operatives scripting this drama will once again go out of their way to depart from the protocols of the scientific method.

The first duty of a scientist is to array all conceivable hypotheses and then try like the dickens to falsify each and every one of them.

I have not yet seen any attempt to array the alternate hypotheses or to falsify the one that the Obama administration (and the Military-Industrial Complex) favors.

And so the meta-question stands before us. We have the Null Hypothesis and the Working Hypothesis, and the challenge to falsify either of them.

H₀ (Null Hypothesis) — The US rigorously adheres to the protocols of the scientific method and the concepts of the Rule of Law.

H₁ (Working Hypothesis) — The US routinely departs from the protocols of the scientific method and the concepts of the Rule of Law.

This episode now in play will help determine which of the two hypotheses best characterizes the practices of our national governance model and methodology.

The function of the scientific method is to sort out false hypotheses. Kerry's failure to adopt and employ the protocols of the scientific method leaves open the fear that, once again, the US may have blindly jumped to an erroneous conclusion.

I am frankly not sanguine about the outcome of this trial.

Let's Blame the Government

I rise to nominate Government as the classical scapegoat for what is wrong with America.

Note that by "Government" I do not mean the current administration or the current Congress.

By "Government" I mean the traditional Concept of Government as humankind has conceived and operationalized it since the advent, some 4000 years ago, of the Hammurabic Method of Social Regulation.

That antiquated, anachronistic, and obsolescent Governance Model is long past its sell-by date, notwithstanding superficial modifications by Machiavelli, et al.

Gaming the System

Politicians, lawyers, and well-heeled lobbyists are uncommonly gifted at gaming the system.

To that list, you can add sheriffs, prosecutors, judges, and other local and state law enforcement officials.

The concept of gaming the system was put on a rigorous mathematical foundation in the 20th Century, with the development of Chaos Theory, Game Theory, and Drama Theory.

It's been more than a century since Henri Poincaré came up with his path-breaking results leading to the development of Chaos Theory. And it's been more than half a century since John von Neumann and his colleagues developed the Theory of Games.

Today anyone whose business involves the Rule of Law understands the art and practice of Gaming the System.

The Rule of Law has been thoroughly hacked and is now well past its sell-by date.

But while the Rule of Law is now kaput, the same 20th Century mathematics that trashed it also provides the model of the successor to the now obsolescent Rule of Law.

The Nobel Prize in Economics was awarded in 2007 to three researchers who developed a novel economic theory known as Mechanism Design.

Hackito Ergo Sum

Mechanism Design is a branch of Game Theory that investigates how to design economic systems which induce participants to play both optimally and ethically.

That is, in Mechanism Design, there is no advantage to Gaming the System.

Our existing legal system is manifestly not crafted in line with the principles of Mechanism Design. Indeed, it is ridiculously easy to game our conventional system of law.

In our present model, it is generally not illegal to game the system, but it is manifestly unethical because it clearly defeats the purpose of having a functional regulatory system in the first place.

Or to put it another way, we do not have a functional regulatory system. We don't even have anything close to one.

But it is theoretically possible to build one from the ground up, using 21st Century concepts in Systems Science, Cybernetics, and Mathematics.

Good and Evil

Consider these classic recipes for Good and Evil:

Good = Love + Compassion + Mindfulness + Mercy + Healing

Evil = Fear + Antipathy + Ignorance + Power + Harmfulness

If you want to diagnose Evil, diagnose the elements of Evil.

If you want to craft Good, discover and manifest the elements of Good.