Measuring Privacy

Edward Snowden’s revelations about the scope of government surveillance made me think about how we can quantify privacy between each other and our government.  Here statistical economics can provide the framework needed to do so, through the use of measuring the index of probability of human action, and specifying that government knowledge of an individual cannot be less than some minimum index, without the use of a warrant to obtain specific information delineated in the warrant. Continue reading

A Network Analogy for Currency

Continuing my recent currency posts, I want to provide an analogy for what Bitcoin is as I understand it. This analogy may exist elsewhere on the web. To those authors who’s ideas I may be infringing upon it is not intentional and please notify me so that I may give the appropriate credit.  I read a great deal and don’t know where ideas come from, weather inside or outside my head.

Bitcoin is not so much a currency as it is a network protocol where the number of packets that can be exchanged grows at some fixed rate to a defined maximum. There are rules for how the packets are exchanged on a peer to peer basis to ensure that packets aren’t duplicated or lost. This is the genius of Satoshi Nakamoto. This is what he created. In this context the lines with what Bitcoin can become are very blurry. As I understand there are portions of the original source code that leverage the network analogy. Continue reading

All Fed Action is Distortionary

In this post I want to introduce some thoughts on why the actions of the Federal Reserve are distortionary, why the creation of money within the shadow banking system is more organic, and propose a more formal definition of inflation or deflation of the money supply.

Milton Friedman identified that the point of introduction of money into the economy benefited the person who introduced it the most, with its effect lowering as it spread further into the economy. Here the money being introduced isn’t aware of the overall size of the economy. It thinks based off of its one interaction that I am worth such and such and as it interacts more and more with the larger economy it begins to poses more information about the action that it can induce. Continue reading

The Price of Gold and the Federal Reserve

I read a Zero Hedge article on the price of gold and the removal of gold form bullion banks. What was not made very clear in that article was why there is a depression in the price of gold along with increased demand. Using a statistical economic framework, I think there is a correlation. First, I need to begin by borrowing from Hayek’s theories on money. The key point here is that private money created is indistinguishable from specie or reserve notes issued by a central banks. This is a cornerstone of the fractional reserve banking system. I don’t even really want to call it that name, because the phenomena is not necessarily a construct of man, but rather man’s response to statistical economic laws.

We create money as a means of exchanging action–utility. This money that is created has its value determined through exchange. In a sense the money introduced becomes aware of the economy and the economy becomes aware of the money. This can be represented in a statistical economic sense using Langevin diffusion. This is a method of stochastic sampling, like what is used in methods of numerical quadrature, such as Markov Chain Monte Carlo.  In the economy, certain individuals collect some of this money as a society begins to accumulate wealth, we call them bankers. Continue reading

NSA Monitoring: The Beat Cop Pandemic

NSA Monitoring: The Beat Cop Pandemic

In all that is the “Meh” of the revelations of the extent of NSA monitoring domestic communications, here is an analogy to help better understand what it is that we are dismissing.

The NSA is not engaging in direct action, where active monitoring and interception of communications is done.  Whew! But what is it that they are doing? Our understanding of the space that is cyber space is giving society a bit of a conceptual block.  To resolve this understanding of the problem we will use analogy.  We are going to transform cyberspace into the real world of three dimensions. Here, the geeks running the NSA data centers are the beat cops, the sort we see driving around town. Continue reading

Natural Gas Price “Spike”

Recent news reports heralding higher natural gas prices at 19-month highs (Bloomberg) due to cold weather (Reuters) and diminished inventories (even reports of the shale boom ending CSM) piqued my interest. There is hope that natural gas futures are bright (Forth Worth Star Telegram).  I wanted to check these narratives against some of my models.

Estimating the marginal utility of money plagues my understanding of economics and greatly affects my ability to model it. However, I developed an alternative deflator called the Energy Price Index (EPI). I took historical Energy Information Agency (EIA) data and performed a regression of the data against the price of oil and natural gas for each fuel source, and then aggregated them based on fraction of total primary energy consumption to get the average price of primary energy delivered to the economy. I tied this model then to the daily WTI crude oil prices and the Henry Hub spot market. Here is an early attempt trying to describe this Economics for Engineers.  This model has several problems first it ignores technological change in the conversion of energy to useful work, it assumes that the distribution between energy and non energy feedstocks is fixed, and it uses an adiabatic model of the US economy. The last assumption only affects the estimation of wealth, I perform a more rigorous derivation of the price and money relationships in The Effect of Price in Macroeconomics and have not had time to rebuild my models based on this work.  The other two assumptions are a function of my own ignorance. Ayers and Warr estimate the necessary information to fix this error. Continue reading

The Second Law: The limited potential of wind energy

Cal Abel
23 March 2013

After watching An Inconvenient Truth and becoming aware of the push for renewable energy, I questioned the efficacy of renewable energy sources meeting global energy needs. I thought thermodynamics held the key in being able to understand this. Thus my quest began in January 2007. Today, I can report meaningful progress on this subject.

To build the appropriate model, I started with some publicly available fine grain data from the Bonneville Power Administration. I used data from January 1, 2007 00:00 to February 28, 2011 12:05 PST. The data is segregated into 5 minute blocks of the average power within that 5 minute period. Here is the excel file of the BPA wind power/capacity and grid load. You can verify this data by comparing the previous links. The date format is from Mathematica and is in “Absolute Time” : each full integer is 1 second. As a reference, 3376598400 is January 1, 2007 00:00:00 PST. The data is posted here in a parsed format only for your convenience and to aid in your analysis as the entirety of the modeling can readily be done in Excel if so desired. Continue reading

Rational Sustainability

Two years ago as part of a class, philosophical issues of sustainability, I wrote a term paper called Rational Sustainability. At the time, I had just finished my derivation of statistical economics while being frustrated at the lack of rigor in microeconomic/macroeconomic theory, I was taking a graduate micro-econ course at the time. I had not yet discovered Austrian economic theory, and as part of my work in deriving statistical economics found Austrian economics and have since come to appreciate it.

The sustainability philosophy class was eye opening for me.  The professor on the second day said that he thought we should abandon methodological individualism, MI. His reasoning here was I think due to his need to advance his concept of sustainability, and that by holding on to MI we could not achieve his vision sustainability. It took me a good solid minute to extract my jaw from my desk and to look around the class. I was the only one who was shocked and who saw this as a terrible course of action to seriously consider.  I saw it as an abandonment of reason. I see it now as the guarantee of a Malthusian future. My survey of the class has since jaded my outlook on the future of higher education in this country. Continue reading

Pre-alpha Release of “Elementary Principles in Statistical Economics”

I just published the theoretical framework of statistical economics, warts and all, which is why it is in a pre-alpha state…  Please look over. Any feedback changes, critiques will be greatly appreciated.

The theoretical framework shows where traditional macro economic techniques ignore the action of individuals. This carries some significant philosophical and practical implications that will have to be covered later.

Here is the link to the post: Elementary Principles of Statistical Economics