Norbert Wiener was the person who inspired my first writings and indeed my first book. Not that I am in any way a mathematician, for I am an engineer at heart, nor am I even a table top philosopher, but Wiener being both a great mathematician and a well versed student of philosophy had many insights half a century ago which are worth sharing.
In a paper he wrote in the mid 1950s (as quoted by Masani in his book on Wiener) Wiener is quoted as saying:
"Suppose, now, that a sum of money at the time of Christ had been left at 2% compound interest; for example the thirty pieces of silver off Judas. By what factor would it have multiplied up to the present time? We are approaching the year 2000 and in order to express our result in round numbers let us suppose that we are at the year 2000. Then one dollar at the time of Christ would amount, at 2%, to a quantity with over ninety-seven zeros. At any conceivable scale of evaluation one cent at the time of Christ put in a bank at 2% compound interest would amount to something like 10 to the 84 times all the value of the goods in the world at the present time. This is ridiculous, but it still has meaning."
He continues:
"The sums earned by money put out to interest have been wiped out time and time again by wars, famines, plagues, and other catastrophes. These catastrophes have been great enough to wipe out every single commercial undertaking of antiquity of thousands of years, and if they had not taken place. the rate of interest for long term investment could scarcely be two tenths of a percent."
Masani then states Wiener's conclusion:
"It follows that modern capitalism is able to offer attractive returns on private investments in long term undertakings only by its condescension of bankruptcies during down phases of its periodical trade cycles. For the well off the resulting losses are often on paper, but they are painfully real to poorer people thrown out of work. Thus the system is not socially homeostatic."
Wiener had a practical insight that many in today's complex world of macroeconomics should consider. For Wiener was a true mathematician, one of the best of the 20th century, and unlike these economists who attempt at mathematics to hide a swath of frailties Wiener made primal contributions, the Generalized Harmonic Analysis and Brownian motion being two which have affected the current world.
In a paper he wrote in the mid 1950s (as quoted by Masani in his book on Wiener) Wiener is quoted as saying:
"Suppose, now, that a sum of money at the time of Christ had been left at 2% compound interest; for example the thirty pieces of silver off Judas. By what factor would it have multiplied up to the present time? We are approaching the year 2000 and in order to express our result in round numbers let us suppose that we are at the year 2000. Then one dollar at the time of Christ would amount, at 2%, to a quantity with over ninety-seven zeros. At any conceivable scale of evaluation one cent at the time of Christ put in a bank at 2% compound interest would amount to something like 10 to the 84 times all the value of the goods in the world at the present time. This is ridiculous, but it still has meaning."
He continues:
"The sums earned by money put out to interest have been wiped out time and time again by wars, famines, plagues, and other catastrophes. These catastrophes have been great enough to wipe out every single commercial undertaking of antiquity of thousands of years, and if they had not taken place. the rate of interest for long term investment could scarcely be two tenths of a percent."
Masani then states Wiener's conclusion:
"It follows that modern capitalism is able to offer attractive returns on private investments in long term undertakings only by its condescension of bankruptcies during down phases of its periodical trade cycles. For the well off the resulting losses are often on paper, but they are painfully real to poorer people thrown out of work. Thus the system is not socially homeostatic."
Wiener had a practical insight that many in today's complex world of macroeconomics should consider. For Wiener was a true mathematician, one of the best of the 20th century, and unlike these economists who attempt at mathematics to hide a swath of frailties Wiener made primal contributions, the Generalized Harmonic Analysis and Brownian motion being two which have affected the current world.
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