Quantum Mechanics and the Zen of Beta Volatility

Intuitively, as Kant, for example, explained it, our mind is pre-occupied. It is pre-enlightened, or as Plato explained it, the Socratic method demonstrates we already know what the truth is but don't realize it until we ask the right questions.

A practical example of asking the right question is the problem of falling Wall Street bonuses and declining tax revenue. As these bonuses decline (overproduction), the wealth does not trickle down as much, which leads to the conclusion that we have to support trickle-down economics to promote the general welfare.

To the question, does resisting Wall Street bonuses (trickle-down economics) generally increase the risk of loss, the answer is yes...but we already knew this intuitively, and anyone that thinks otherwise is being counter-intuitive, right? The quantum value "risk," although empirically verified to have increased with the loss of tax revenue, has been conserved and conveyed (constructed) as truth (intuitively known) in the form of the question being asked.

Conserving the identity of the variable to be explained is a tautology--it mirrors the image of the question. When the answer is the intuitive hypothesis (the Zen) to be empirically tested, it is presumed (by trying to prove it rather than disprove it) to be the truth (ignoratio elenchi). Ignorance of disproof (disapproving something by approving something else) is essentially the definition of confirmation bias.

While the question to be asked is whether income is distributed equitably enough to ensure risk is more equitably distributed (less volatile), it does not mirror the practical image (the objective identity) of the conserved, quantum-risk proportion and the value it is presumed to legitimately produce.

The zeitgeist of modern political-economic theory and practice mirrors the image of modern physics. Risk and value are elusive quantum existing both separately and as a simultaneous singularity that commonly binds us (our self-interest) to an objective, existential reality. Risk-value imaginatively exists everywhere and nowhere at the same time until it is objectively realized at a particular point in time and space by its direct, empirical observation.

Technically, understanding how value objectively derives from risk is the Zen of modern physics. We have an intuitive sense about what the good life is and how to get there since, apparently, truth, whether dependant on perception or not, has present value based on the probability of future events.

With the "self" being the only thing we objectively know, risk derives from its preservation. ("I think, therefore I am" is a subjective but objectively confirmable hypothesis, especially when imagining the probable risk to that existence.) Acting in the interest of the self is (objectively and at the same time intuitively) integral to (or the Zen of) the probable risk of loss that we imagine as fully assumed, and with as many objective realities as there are people, the probabilities--separately, combined, and fractally compounded--are virtually limitless. Hence, the value derived from the truth of the fully imagined risk (in one's self-interest) is naturally conserved in historical perspective (in one's self-image). Value is organizationally structured to reduce the probabilities by positioning (or pre-dicting) the risk.

Economics, for example, has become a technical operation of applied quantum mechanics. The same technical graduates building quantum calculators with Q-bits are building quantum risk determinators (the essential bits and bytes of RTV's) for Wall Street to pre-dict (since what they are really doing is dictating) where the risk is to be positioned at any particular time. The result (the risk-value derived) is then determined to be freely ontological (technically based on the laws of nature) with the Zen of feeling the direction of a trend (professional expertise) being what determines the marginal product.

The Zen of quantum mechanics avoids risk (like when animals are spooked before an earthquake) and produces a profit (capital gained and accumulated to avoid risk). Quantum accumulation of capital empirically expresses what we intuitively already know--the reward naturally accumulates with those capable of predicting the position, or timing, of risk.

Humans are economic animals, and just like other animals in nature, we struggle to successfully reproduce. With humans, however, there is a selective deontology that passes on values. Risk-value, as discussed in a previous article, is conserved in historical perspective, and like other animals, humans operate with the capacity to avoid risk, but in our case, risk is avoided to make it unavoidable for others, and the best way to do that is to create the "Zen" of beta volatility.

Deriving the Value of the Risk

In the quest for short-term profit, means have emerged to derive current value from the perception of future risk.

The perception is not limited to deriving the value itself to assume a useful, current value, but to also control the perceived liability of the distributive risk to the reward.

Mark-to-market accounting, for example, a favorite tool for Enroning your way to success, affects the perception of the risk by projecting it forward with current value.

Though the current value has useful presence, the future is much more uncertain. The feedback can have a disorderly effect from which current value can be derived.

The volatile value of the risk leads to "making markets" and the systemic importance of firms like Goldman Sachs and Bank of America who are so big they can determine the value of risk derived from the markets they make.

It is the size of these firms that makes them powerful, so powerful that they can govern the risk for everyone else. Both investing and trading is reduced to guessing where the big money is going next to make and mark the market, and markets will be made depending on the position taken.

The reason trading ranges are so broad is because the market is being manipulated for the short term gain of derived risk value. If your costs are highly energy dependant, for example, the probability of risk is so high you are likely to engage the market makers to make the market for you. It would be naive to think the market will not be made to your detriment with a liability limited to proving the probability of the risk defended by a firm that has all your money and none of the risk.

The housing market is a visible demonstration of derived risk. Value has been generated on both the up and down side. The price differential has been generated by derivative financial instruments that transferred the risk to future value so that the value differential is simply: long on current value, short on future value.

The risk that generates the value (the boom and bust dynamic) is always present but has current value by the disposition of instruments for deriving value from the risk.

The value of the risk is largely time dependant, and it is the function of risk-transfer instruments (making markets) to time the market with certainty that is limited to the market maker. The result is both a zero-sum profit and a limited liability.

The value derived in zero-sum avoids the risk of liability since the value has the "assumption" of risk. The value derived, however, reflects the value of the risk whether it was actually assumed by the beneficiary or not.

Consider, for example, risk instruments designed to drive up home prices with easy credit without the investment in growth to pay the mortgages. You don't need a PhD to figure out how to derive value from the design (the making of the market) with virtually no risk, especially if the capital is so consolidated that the timing is in your control. The assumption of the risk is a fraud, and fraud is a crime, especially if it causes a detriment like The Great Recession.

Consolidation of the capital is the essential source of the value detrimentally derived, yet legislators consider it to be an asset, not a liability. Financial reform has been expressly identified as not being a function of organizational size. It is only a function of regulation, or the absence of it, according to the reformers.

This is a monumental mistake! The president can give speeches all day about how the Democratic Party's economic plan is obviously more practical than staying the Republican course, but without clearly identifying the size of the firm as the source of the problem, the derivative value of the risk is conserved. Only the timing changes; and since the timing of the value derived will be determined by government regulation, the derivative value will then have the legitimacy of public authority. Not only is the risk of liability reduced, but any retributive value can be blamed on government intervention.

The retributive value of the risk is then freely associated with government intervention and not a fundamental attribution of organizational size, except that government is too big.

What continues to ail us will be legitimately blamed on government intervention in the marketplace, but only as a derivative of that value. The value is actually derived from the allowable size of the firm and the consolidation of the risk.