The Value of Uncertainty

Uncertainty creates value.

Beta risk, arbitraged into short-term profit, fits an investment model that is operationalized with the gamma risk accumulation of that value.

All the "uncertainty" that has pro-growth investment on hold (an unsure tax liability and the level of anti-deflationary stimulus) is being fundamentally attributed to government intervention in the marketplace (the gamma risk).

While the fundamental attribution of risk is correctly gamma, the causal relationship is false, resulting in fundamental attribution error and a psychological affectation we call "market sentiment."

The false sentiment creates a false valuation of the risk. Its current value must be adjusted for the fundamental attribution error. It is an affective disorder--it literally has a disorderly effect--that results in volatility.

The volatility created is transformed by the free-market mechanism into what appears to be an uncertain oscillation of current value based on the future value of the risk. The value is rediscovered with such a high frequency that it appears to be out of control.

The future value of the risk, however, is all but uncertain, and the disorderly oscillation, defying technical indicators to suggest all the uncertainty, is really the deliberate result of fundamental attribution error.

Government does not cause the beta-risk volatility. The argument is a post-hoc fallacy.

Government does not cause the gamma risk, it is the gamma risk. It is the risk that cannot be avoided, only transformed. It is the fundamental risk that never goes away. It is always present, and always presents as the probability of risk. It is a persistent value that cannot be created or destroyed, but accumulated and distributed.

Probable accumulation and distribution of "the risk" is what causes oscillation of its current value, and that value can be manipulated into a highly certain effect with the highly certain value of a stimulus-response affectation.

Derivatives are designed to cause that affective disorder, currently the target of government regulation.

Government is not the cause of the risk associated with "making markets" (vehicles for tranferring "the risk" into a gamma proportion). It is the effect. This is where political-economic philosphers like Ayn Rand fail. If "the risk" were allowed to accumulate without "effective" government intervention, it will self-correct with complete certainty (it will, certainly, implode and catastrophically burst in a gamma-risk proportion).

Government is not what is to be avoided, it is the accumulation of the gamma risk and the beta presentation of that risk in the "certain" value of its current volatility.

The accumulation of value that occurs looks like an ontological uncertainty, but it is not.

Who could have known that trillions of dollars of net worth would be consolidated into the upper-income bracket in the latest cycle of boom and bust?

It happened, but the benefit is really not an act of deliberation. It just happened. Nobody caused it...it just happens. If it were ontologically meant to be any other way, it would be.

With or without government intervention, so the Ayn Rand kind of argument goes, the result is ultimately the same--the winners will win and the losers will lose. However, the argument continues, government intervention to reduce the risk of loss causes a productive deficiency and deflationary crisis, resulting in a dead-weight loss. We are better off just letting the market be (and allow the Enrons of the world to manufacture shortages and commit massive fraud).

Adherence to the Hamiltonian model of government (cumulative management of the risk to a narrowly distributive benefit) makes the value of "the risk" all but uncertain.

Without government intervention that prevents accumulation of the risk, promoting its deconsolidation rather than its consolidation, crisis will always determine its value, and its current (useable) value will always be more determined by the probability of its political than its economic management.

Political management of the risk gives it elasticity. If it is too inelastic, the crisis will have a more uncertain market value.

Since the accumulation of value relies on the certainty of a market legitimacy, it is absolutely critical to maintain the value of that legitimacy. Without it, the value is highly uncertain. The polarity of the current value can change with sentiment, and that kind of retributive volatility presents a current value that is detrimental to the currency (the use value) of a power elite functioning as a ruling class empowered with market value "governed" by political management of the risk.

Political management of crises cycles the gamma risk into beta proportion, preventing an alpha valuation of the risk. When the gamma is too high, as it is now, it transforms into beta risk to be managed by government authority. That authority will be used to prevent the declining rate of profit, presenting a current valuation of the risk that is really anything but uncertain.

Take high-frequency trading, for example. As it becomes apparent that it can "govern" the trading range of equity markets, the loss of legitimate process causes regulatory intervetion. Since trusting self-regulation of the market is a low probability without deconsolidation, government will intervene to "govern" the process, giving the outcome the force and legitimacy of public authority. The value of the risk has been transformed from private to public authority, and conserved as "market" value. The uncertainty (the risk) is still present to produce an alternating currency of value, but easily transformed into a direct currency of accumulated benefit with a low impedance value.

At the macro level, the false uncertainty (the fallacy) creates the value to be arbitraged in the free market which, in turn, resists the declining rate of profit without growth until a favorable tax policy can be extorted or a Keynesian stimulus occurs.

Since there is no deconsolidation into an alpha risk proportion, the elasticity of the risk is "governed" to effect a shortage (slow growth).

By increasing the supply of money in the name of growth, the declining rate of profit is resisted as margins get support.

It appears that government is causing shortage. Profits, then, due to shortage, are "fundamentally" legitimate, not the result of speculative demand, and the proposed financial reform will, by misattribution, kill the formation of capital needed to relieve the shortage government has seemingly caused. Government, then, foolishly kills the hand that feeds it.

The fallacy built into the Hamiltonian model is an ingenious fraud. It stems from an error of known quantity that fundamentally misattributes the risk, and thus the value of that risk, inspiring a false sentiment that keeps the media fully involved with a persuasive but fallacious, post-hoc political ersiticism.

A problem kept fully involved is never likely to be resolved.

The eristic provides uncertainty of a known quantity, and the problem preserved is value conserved.