Gravity, Heat, Light, Money and Freedom

Typically great scientific achievements start with some clue that provides a framework from which the right questions start to be considered. Curiously the time span from the start to the end of a theory is that of one generation: from Galileo formulation of the physics in terms of variable motion to Newton theory of universal gravity; from Thomson and Carnot formulation of heat in terms of mechanical work to Joule and Clausius kinetic theory of heat; from Faraday discovery of magnetic induction to Maxwell theory of light. From a Kuhnian perspective the one generation span is not that surprisingly. There must be dramatic shift in mindsets in order to fully grasp the meanings and potentialities of the new framework. The intra-generational period provides a gradual exploration of the potential implications of the new framework until someone completely absorbed by the new method of thinking is able to synthesize the achievements into a general grand theory that, if lucky enough, can reveal deep truths beneath the phenomena.  The beginnings of a new theory are not fortuitous. They always occur at the time when the prevailing technique can provide relevant data. Galileu, Thomson, Carnot and Faraday are children of the industrial technology of their time. The telescope, the heat engines, the controlled use of electricity could not have been achieved much before. The technique and the genius coalesce into one major new idea.

And I believe we are in one of those moments in scientific history. The major recent developments of  financial technique together with the vast experimentation in monetary theory has provided a fertile ground from each some genius can glimpse some deep clue about the nature of money. It is some sort of Galileo moment, we just do not know yet who the new Galileo is/are. It is pretty obvious today to anyone who take seriously the inquire about the nature of money that the whole previous obsession with concrete manifestations of money and their efficiency of use were misguided. The social realization of money does not seem to be relevant at all: money must have a deeper meaning within the functioning of the economy the surpasses its manifestation as metal, paper, digits, or credit or block chain. Every one of these can serve as money, but none of these is money. If we are able to abstract its meaning from its manifestations we can potentially implement a new kind of money that frees us from the radical shortcomings of its historical social realizations. Just like the failure of the metallic money is well understood for quite some time, the failure of the fiat money should now be evident to any sensible person. Not because of inflation, as many have feared for so long. Fiat money as we know it today has empowered the monetary bureaucrats with authority that should be unacceptable to anyone who take seriously the problem of political representation. The single most important price of the economy, the cost of capital, cannot simply be dictated by the will of a central ruler. Do not be fooled: the bureaucrats have no clue about what they are doing. Inflation targeting is over. We live in the era of monetary bureaucrats with unbounded power and unbounded ego. We desperately need a true theory of money.