Principle of Duality
The Money
Sometimes it happens that a subject fascinates you to such an extent that it literally blocks your thought process. This happened with me when I came across an article about Money. Though this was not supposed to be part of Duality series, I thought of writing my views about the article before going to ‘The Society’. This does not have any direct bearings on my take on Duality, it is however an interesting topic to be covered. In order to keep the continuity of the blogs (so that I remember that I have to write on Duality again), I am including this one inside the same heading.
The article’s title simply asks “What is Money?” Though as an Engineer or from Science faculty we all had a very brief stint with Economics but we have all come across this question many a times. Recollect what we have read, interpreted and understood in all these days. Can we define Money? Do we really understand what Money is? To be honest I really do not. This is a great point of discussion many Economists, School Teachers keep talking about but never a clear idea is conveyed. The Economics session if I recollect correctly from school is like board meetings where after 5 minutes of discussion everything starts going at 150KPH and 6 ft from the ground.
Now what is Money? The Article didn’t provide any definition rather it contained explanation. Majority of people around us think the Paper Note inside our wallet, the plastic cards tugged inside the card holders is money and like in usual cases majority of us are wrong.
Money: Any Tradable asset is Money. House, car, your services everything that you can think of trading or carries market value is Money. The Paper Note carried by us is nothing but Currency.
Currency: Currency is an accounting system for Money. Since we cannot trade our Car for food grains or House for a Doctor’s Appointment we have currency for that.
Thus Currency is a Paper Accounting system for Money. Thus logically and ideally the amount of currency floating in the market should be equal to total amount of Money present in the world i.e. the currency at all time should have equivalent amount of Asset backing it.
The other explanation which I found very interesting in the article was differentiation between Value and Price.
The amount of Paper currency per asset is price. The amount of things an asset commands in trade is its Value. Value is almost a constant thing and it never changes. For a house the doors, roof, windows, floor are all it’s Value.
The Price is something which we all fear that further spans to economic terms like inflation and deflation. Like Money we all come through terms like inflation almost every day in news papers, TV Shows, Political speeches and many other insignificant places like on a tea stall with bunch of tag holders smoking cigarettes. The student preparing for Management entrance mugs up the definitions but never really understand the underlying concept. As a student I never understood the concept as well.
As per the article: The act of flooding market with Currency is Inflation.
This means if excess Currency is pumped in the market with no asset backing it up is inflation. Price is the ratio of currency and Money, so if Currency goes up while denominator remains the same the resultant price goes up. This is inflation.
Deflation: The act of draining market of currency is deflation.
Now if a large sum of currency is withdrawn from the market the denominator will go high and resultant prices will go down. This mechanism is deflation.
These are simple concepts which I thought sharing with all of you after reading this article. The other articles by the author touches issues like Sub Prime crisis, the fractional reserve banking etc. I think if I understand the topics clearly I will be writing on them pretty soon. To sum up this edition of duality I will use a quote aptly fitting in this context
“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.” - John Kenneth Galbraith
Tuesday, June 29, 2010
Wednesday, June 23, 2010
Principle of Duality
Part 1
The Concept
“Light itself is quantized”, said Einstein and nobody believed him. We all have studied chemistry as a subject where facts were presented to us in form of theories in chronological order as they occurred. We all started with Dalton’s atomic theory moved to J.J Thomson’s Plum Pudding model. Rutherford’s scattering experiment and his attempts to fix the structure of an atom. His failure to explain the stability of atom lead to Neil Bohr’s structure of atom which was later refined to produce the quantum mechanical model. We all have studied the same in our higher secondary school texts. Things which we have never read or even tried to understand are that how exactly it happened. Most of us will never know that all these Physicists were contemporaries. J.J Thomson and Rutherford taught in the same college. Neil Bohr was himself a student of Rutherford and later became his colleague at Cambridge. Major portion of our academics concentrate on theories and what they implies, as a student we never learn how it would have actually been derived.
Energy is radiated and absorbed in the form of packets; these packets of energy are known as quanta. Max Planck derived this theory to justify Black Body radiations though he himself never believed in the concept of quantum, it was just a hypothesis to prove an equation correct. Neil Bohr borrowed the concept of quantum to fix the flaws of his atomic structure and to find out the energy states but like Planck he also had little faith on the concept of quantum. For all the leading personalities in Applied Physics quantum was just an aid to fix their equations. The age old wave theory dominated as it was able to justify more phenomenons as compared to Newton’s corpuscular theory. During this period itself a man stood alone with his theories simple yet difficult to digest, effective but hard to accept, practically justified but theoretically challenging the established framework of modern Physics. Albert Einstein received his first Noble for Photoelectric effect, he justified this phenomenon by considering light to be quantized, that it is received in form of packets (if you remember from your textbooks photoelectric effect is taught just after Planck’s Quantum Theory, but we will never know that Planck never accepted Einstein’s quantization of light theory). When application was sent to Scandinavian committees for consideration, people accepted the photo electric effect but were too apprehensive to neglect the wave theory.
Wave nature or Particle behavior both explained certain natural process, but still there were experiments that time to time favored either one of them. During the mean time elite physicists like Heisenberg tried to make situation even more difficult. Principle of uncertainty in a way helped to combat the existing war between the wave and the particle. Louis De Broglie came up with an exciting theory, the Principle of Duality. Every matter and energy exhibits wave as well as particle behavior, the extent of its particle or wave behavior depends on the mass in case of matter. The paradigm shifted in favor of Einstein. His theory of relativity too stated that matter can transform into energy if it attains velocity of light, the mass of a body is not constant it is relative to velocity.
This was a brief account of our history which is never taught to us as a story. Just imagine how it would have been for all these people to argue in favor of their theories, for the likes of Planck and Bohr, who used the concept to prove the validity of their concept but never really believed on that.
Principle of Duality actually suggested that natural phenomenon can be explained for an elementary particle like electron and also for a human being. We can devise the structure of the atom and can use the same theories to explain the structure of a society. After all atoms are basic building blocks of all matter, all the actions sums up.
This ends the first installment of Principle of Duality. We are yet to discuss the ‘Society’.
Part 1
The Concept
“Light itself is quantized”, said Einstein and nobody believed him. We all have studied chemistry as a subject where facts were presented to us in form of theories in chronological order as they occurred. We all started with Dalton’s atomic theory moved to J.J Thomson’s Plum Pudding model. Rutherford’s scattering experiment and his attempts to fix the structure of an atom. His failure to explain the stability of atom lead to Neil Bohr’s structure of atom which was later refined to produce the quantum mechanical model. We all have studied the same in our higher secondary school texts. Things which we have never read or even tried to understand are that how exactly it happened. Most of us will never know that all these Physicists were contemporaries. J.J Thomson and Rutherford taught in the same college. Neil Bohr was himself a student of Rutherford and later became his colleague at Cambridge. Major portion of our academics concentrate on theories and what they implies, as a student we never learn how it would have actually been derived.
Energy is radiated and absorbed in the form of packets; these packets of energy are known as quanta. Max Planck derived this theory to justify Black Body radiations though he himself never believed in the concept of quantum, it was just a hypothesis to prove an equation correct. Neil Bohr borrowed the concept of quantum to fix the flaws of his atomic structure and to find out the energy states but like Planck he also had little faith on the concept of quantum. For all the leading personalities in Applied Physics quantum was just an aid to fix their equations. The age old wave theory dominated as it was able to justify more phenomenons as compared to Newton’s corpuscular theory. During this period itself a man stood alone with his theories simple yet difficult to digest, effective but hard to accept, practically justified but theoretically challenging the established framework of modern Physics. Albert Einstein received his first Noble for Photoelectric effect, he justified this phenomenon by considering light to be quantized, that it is received in form of packets (if you remember from your textbooks photoelectric effect is taught just after Planck’s Quantum Theory, but we will never know that Planck never accepted Einstein’s quantization of light theory). When application was sent to Scandinavian committees for consideration, people accepted the photo electric effect but were too apprehensive to neglect the wave theory.
Wave nature or Particle behavior both explained certain natural process, but still there were experiments that time to time favored either one of them. During the mean time elite physicists like Heisenberg tried to make situation even more difficult. Principle of uncertainty in a way helped to combat the existing war between the wave and the particle. Louis De Broglie came up with an exciting theory, the Principle of Duality. Every matter and energy exhibits wave as well as particle behavior, the extent of its particle or wave behavior depends on the mass in case of matter. The paradigm shifted in favor of Einstein. His theory of relativity too stated that matter can transform into energy if it attains velocity of light, the mass of a body is not constant it is relative to velocity.
This was a brief account of our history which is never taught to us as a story. Just imagine how it would have been for all these people to argue in favor of their theories, for the likes of Planck and Bohr, who used the concept to prove the validity of their concept but never really believed on that.
Principle of Duality actually suggested that natural phenomenon can be explained for an elementary particle like electron and also for a human being. We can devise the structure of the atom and can use the same theories to explain the structure of a society. After all atoms are basic building blocks of all matter, all the actions sums up.
This ends the first installment of Principle of Duality. We are yet to discuss the ‘Society’.
Subscribe to:
Posts (Atom)