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IS THERE ANY LAW OF NATURE BEHIND THE FINANCIAL

CRISIS OF 2008-2009?

Overview of INTRODUCTION TO PATTERN CHEMISTRY

by Yuri Tarnopolsky

http://spirospero.net/patternchemistry-parts1to3.pdf
http://spirospero.net/pattern-chemistry-part4.pdf

At SCRIBD: http://www.scribd.com/doc/15606783/INTRODUCTION-TO-PATTERN-
CHEMISTRY-Parts-13-
http://www.scribd.com/doc/28939118/Introduction-to-Pattern-Chemistry-Part-4

Pattern chemistry is an attempt to answer the question:

What is so different about human matters, including history, politics, economy, etc., as
compared with subjects of natural sciences?

That was, in essence, the question asked by George Soros in his “The Alchemy of
Finance” and subsequent publications on “reflexivity.” The roots of the question are as
old as science and philosophy.

The INTRODUCTION is written in an idiosyncratic form and is anything but a


“theory.” The author of the INTRODUCTION is a chemist (Ph.D.)—neither economist,
nor philosopher, neither investor, nor (currently) university professor—who has been
closely watching historical global changes since 1956, first from communist Russia and,
since 1987, from capitalist America, including the progress in both sciences and
humanities where the author was quite amphibious. The financial crisis and election
campaign of 2008-2009 were especially stimulating for the “generalized chemistry”
project, started back in 1979, and they speeded it up to conclusion.

Pattern chemistry is based on (1) ideas of Pattern Theory developed by Ulf Grenander
and (2) generalization of some fundamental concepts of chemistry, in particular, the
concept of transition state.

The concept of pattern has been in circulation in both sciences and humanities since
Plato. Although outside Pattern Theory it is one of most evasive notions, pattern always
implies a kind of “invariance” or “regularity” which appears in a range of different
objects. What distinguishes the author’s approach from other studies is that he considers
patterns not within a certain discipline or field of study, for example, patterns of history,
language, behavior, in image recognition, etc., but across the interdisciplinary borders.
Obviously, this makes little academic sense.

The central object of pattern chemistry is exystem: evolving complex system for which
the unpredictable novelty is the main property of interest. A typical—and the largest—
exystem is economy, which today includes all spheres of human activity and incorporates
not only art, science, technology, markets, finances, ideology, religion, education, politics,
family, etc., but also the fate of all living organisms on earth, climate, mineral resources,
and large scale trends of human civilization.

We do not—and cannot— know the future even in the case of the financial markets,
although they are studied as an academic discipline and involve a large number of bright
thinkers, some rewarded by the Nobel Prize. We know only possible alternatives and
scenarios, never complete and never consensual. It is the fact of the matter that although
some economists had unambiguously warned about the inevitable danger, their
predictions made no impression on either politicians, or institutions, or public. On the
contrary, the election of Barack Obama was something no serious person could predict
before well into the campaign. The story of global warming is up for the next case study.

A striking feature of the financial crisis is that it has been generated by the very economic
strategies employed to prevent it and insure against the loss. One may also notice that the
global policy of the United States, for decades strategically aimed at the stabilization of
the world, had exactly the opposite effect of deep destabilization—after a long successful
period.

The question addressed in INTRODUCTION TO PATTERN CHEMISTRY is


formulated as follows:

If we cannot fully know the future and cannot predict the exystemic event
because it is irreversible and happens only once, how far can we still look into
the future and what can we still know about it with certainty?

The hypothetical answer is that patterns, unlike configurations “covered” by them, can
have a relatively long term validity, but at the price of high generality and abstractness,
even bordering with triviality. In order to extract the scant but reliable and important
information, we must generalize the principles of natural sciences as much as possible,
so that they would be applicable to both physical and human matters. Patterns, unlike
equations, thrive in both sciences and humanities because they are basic and universal
forms of human understanding.

For example, we should probably speak about instability instead of energy, event—with
the beginning and the end—instead of process, inequality of distribution instead of
entropy, waste instead of heat, and a measure of fluctuations instead of temperature. In
addition, we should abandon the use of the concept of probability for non-repetitive
events and incomplete (open) event spaces. The improbable event has no probability.
Thermodynamics applies only to well defined systems, while the future is the least
defined and the description of the present exystem is always incomplete. Moreover, we
should abandon all absolute estimates and monitor only the trend in terms of MORE and
LESS. Finally, we should regard an event as a triad of consecutive stable initial,
unstable transition, and stable final states, which is the typically chemical approach to
the phenomenon of change.

Without going into further details, the financial crisis, for example, is the result of wealth
concentration and inequality of income distribution. This opinion alone does not require
any pattern theory or pattern chemistry. It has already been expressed by some analysts
and looks quite commonsense. The question is: can we find any law of nature behind the
unfortunate turn of events? Or is it just a bad luck? Or somebody’s malice? Or is it
indeed unfortunate?

In author’s opinion, it is exactly the law of nature, human or otherwise, that any
inequality of distribution of the resource of generalized energy, whether in calories or in
dollars, is synonymous with the overall instability of the exystem. It follows not from any
scientific or pseudo-scientific theory, but from the way we use the basic axiomatic
concepts which could not be defined other than in a circular way through each other.
Energy is the best example of an axiomatic notion.

The stability of the social system cannot be an ultimate goal because the ultra-stable
system cannot evolve and adapt to external and spontaneous internal changes. It can only
undergo a radical change exemplified by the empires and dictatorships of the distant and
recent past. Yet the uncontrolled and unrestricted growth of concentration of wealth
and power, whether globally or nationally, will inadvertently increase exystemic
instability. This is all we can know about the future, but whether we should resist or
resign to any particular trend, no law of nature can say. If we understand that we deal
with a law of nature and not a passing accident, and if we understand the few
fundamental alternatives, then our choice can be truly intelligent.

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