interesting parallel between turbulence and economics

Broken Symmetry: A Reynolds Number for Cash-Flow?

A Reynolds Number for Cash-Flow?

George Dyson explains:

In any hydrodynamic system, the non-dimensional Reynolds Number characterizes the ratio between inertial forces (the result of mass and velocity) to viscous forces (the result of the inherent stickiness of the fluid). When the Reynolds number reaches a certain critical value, the system changes from laminar to turbulent flow. There is an equivalent to the Reynolds Number for an economic system: the ratio between the speed (and amplitude) at which currency is flowing through the system to the viscosity of the financial medium. The Reynolds number of our electronically-mediated economy has recently gone way up, with destabilizing results. The latest problem is that automated programs — -the barnacles of the New Economy — -are now trading *within* the frequency spectrum of the turbulent boundary layer. If this happens to a ship, it will slow down, and if it happens to an airplane, it will go into a stall. Where’s the anti-fouling paint?

I was unimpressed with the Rushkoff essay to which Dyson is responding. The historical arguments are far too selective in their use of evidence. What about the invention of double-entry bookeeping or the perfection of the patent system in the 19th century? Markets are neither purely constructed nor purely ecological — a key point made by Vernon Smith in his latest treatise.

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