Comments on "Information Theory, Money, and the Oil Price Collapse"

The below are my comments on "Information Theory, Money, and the Oil Price Collapse" by Brett Maverick Musser

Setting aside the rant on Sanders and Trump, I thought it was a good read. I have always felt that an academic understanding of economics impedes an understanding of the economy. What do I mean by that? Nowadays, people try to explain everything through economics. People try to apply a mathematical model to how the world works. It's very powerful if done right. Mathematics = truth. If you can say, look, this is not a question of Republican vs Democrat, there is a theorem that proves that given input A and desired output B, we should do x and not y and anyone that disagrees is a charlatan. The problem with this is that to solve the mathematics of the economy you have to make assumptions that people will behave deterministically and that’s just simply not the case. People are almost always non-deterministic.

If I read the argument being made by the author correctly, he seems to say that we shouldn't let central authorities distort the information required to make good financial decisions and that we can force them to stop creating noise by creating a single market outside of the current financial system. I agree with that. But I would add that a single market precludes three things: common industry standards, similar labor protection standards, and common environmental protection standards. These are political issues, not technical, and they need to be met head on not skirted around. If you don’t have these standards, then the players who violate them will end up with unfair competitive advantages over other players who care about their people. It doesn’t matter if the money flows through the blockchain if say California decides that the minimum wage needs to be $50/hr and Nevada decides that slavery is legal again. Obviously, that is an extreme made up example, but you get the point.

So given that the market is non-deterministic, how do we proceed? The way you fix things is by, using decentralized blockchain technology, agreeing on what these industry, labor protection, and environmental standards are, and requiring that all participants adhere to these standards. Once in place, you allow membership only to people who can accept these standards.

Using blockchain technology, you can issue smart contracts that can ensure that participants are adhering to standards and automatically kick them out if they are violating the rules. This is far from perfect, but better than what we have. This way, anyone can just start a business and research what standards need to be met and as long as they continue to meet the standards they can continue to participate and trade.