On information

Pick up that dollar young man

If we encounter a man of rare intellect, we should ask him what books he reads. — Ralph Waldo Emerson

Propaganda by Edward Bernays outlines how people are unable to distinguish facts from news and advertising (both of which are now politicized). One day, they awaken poor, angry, and unable to easily distinguish up from down. News, as a concept, is gone. Science, as a concept, is gone. In information warfare, the assumption that reliable, low-context/high signal communication is even possible recedes into fantasy, taking with it both news and science and replacing them with politics and marketing. We are past Scientism and unbiased journalism and are fully engulfed by narratives with extreme polar. There is no more objective Signal just oceans of subjective Noise.

I think that the real news, viewed from behind the new, algorithmic choice optimization, is what you think you see with your own eyes AND have checked out against the analytic parts of the scholarly literature. But it is more about what the algorithm thinks you want to hear and see to keep you interested so that you can be fed advertisements.

A few years ago, I was in Aguas Calientes Mexico, known for beautiful women, sweet corn, and rolling hills. While there, in a local open air market, I found local currency worth almost exactly ten US dollars. 

Technically, the money wasn't visible to everyone, but the signs announcing gasoline prices clearly are. In the last few years, I have observed those prices decoupling, both from the price of oil and from one another, whether across town or even across the street. Growing up, I always noticed whether the gas prices on opposite sides of the street differed by one, two, or sometimes even three percent. 

Today, such prices typically differ by more even more. I recently saw two stations across the street from one another with prices differing by $0.36/gallon and two stations a mile apart charging respectively $2.49/gallon and $3.86/gallon. For a median American driver, $0.20/gallon, invested at historically normal rates of return (6%-7%, would add up to about $1,500 over the next decade. Median retirement savings for families aged 55-64 is only $15,000, and for families with retirement accounts, median savings are still only $150,000.

I realize that it is somewhat unreasonable for people to not behave like Homo Economicus, but if people with little to no capital are becoming less economically rational with time, this suggests that people don't feel that they can predict the future in basic respects. Time preferences have shifted from low (save) to high (consume). Hw can you blame these people for becoming financially reckless. Theory, as well as practice, tells us that the information that they have been given is misleading and not optimal for low time preference decision making.

Financial economics provides the analytic literature on economic caution and risk. In 1987, Larry Summers & Brad DeLong showed that given a risk premium, a standard assumption in financial economics, irrational noise traders crowd out rational actors over time. When Peter Thiel and Eric Weinstein talk about the shift from "concrete optimism" to "abstract optimism”; I think that he is characterizing the pattern that is selected for by this dynamic. This shift towards noise trading inflates equity prices, concentrates wealth, and causes more speculative assets to command higher prices each decade than similarly speculative assets would have commanded in the previous decade. With 84 percent of corporate valuations now taking the form of intangibles, up from 16 percent forty years ago—that sounds like the world we currently inhabit.

The overall divergence of map from territory in economic settings ultimately means the annihilation of optimal strategy as we know it for most people, making apparent economic prudence a predictably ineffective strategy, which means that in the long run, if we can’t figure out a better way to aggregate local and global economic information, we won’t have the patience to effectively use that information to make better long term decisions. If one becomes continuously unable to discern signal from noise when making economic decisions financial outcomes will continue to erode.