Tuesday, November 16, 2010

Me and my chocolate milk

I like chocolate milk, and buy it from the corner grocer now and then. The corner store barely has a 'liquid' market for chocolate milk. What so I mean by liquid market? In a liquid market for chocolate milk here, the milk man can deliver chocolate milk in an efficiently full case on his route and all retail outlets have approximately the same probability of shortage or waste among dairy products.

In other words, if we chocolate milk buyers at local corner grocers want to have the same experience as regular milk drinkers, then we have to be somewhat reliable in our purchases. The milkman and I coordinate well, though we have never met.

When markets are liquid what else? Planners can use statistics reliably to compute expected demand! Liquidity assumptions also allow economists to associate double entry accounting and the assumption of equilibrium.

But here is the catch.
Why do the milkman and the grocery shopper coordinate well? This is like the Einstein and Bohr debates, how do two uncorrelated particles coordinate? Simple, we share the parking lot outside the store on infrequent occasions. Both the milkman and I have a subtle desire to make out chance meetings continue reliably.   What Neils Bohr was pointing out to Einstein was that there was always uncertainty in particle measurement. That uncertainty was always enough to hold a potential connection of the particle with it originating force, particles never become completely disconnected after a collision when you measure them. The milkman and I retain an impression from our chance meetings.

So, back to liquidity. Its assumption implies that me and the milk man are completely uncoordinated! Why? Because the economy removes known coordination by quantization, finding efficient quanta of cargo size that restore uncertainty and reduce transaction costs. So if dairy consumers and the milkman meet too frequently in the parking lat, then both the corner store, the milkman and the consumer change the cargo sizes. That is why chocolate milk comes in quart, pint and gallon; and stores come in supermarkets or corner markets; and milkmen delivery in panel trucks or semi-trailer. The adjustment will also involve changes in inventory cycle, which should be a spectral quantization if theory holds.  The mathematical norm to use in one in which the economy seeks the proper cargo sizes and transaction rates to reassert the fixed uncertainty of chance meetings.

The physicist, uses a measuring device in an experiment, but the measuring device forces the experimental results to appear as particles because the measuring device always has to enforce a level of quantization work to operate properly. The grocer has the same problem, he can only measure chocolate milk to the extent that his measuring device (the customer) can force chocolate milk into container quants.

No comments: