Monday, April 16, 2012

The Six Million Ton Baby

Attack of the Giant Baby
A bit more than twenty-one years ago, as we prepared for the arrival of our first child, I attended some classes for "expectant fathers".

I am not sure how well they set me up for the realities of parenthood - can any class do that, really? - but I learned one thing that I have not forgotten.

If a baby grew as fast throughout the entire pregnancy as it does in the first trimester, we were told, then at birth it would weigh six million tons!

Exponential growth is like that.  Mathematically, it can produce fantastic numbers; but in the real world, it bumps against limits, and slows down or stops. (A newborn is still growing pretty rapidly, but after twenty-one years s/he is pretty close to final size...)

Another way of saying this is that if we demand that some mathematical quantity grow at a steady exponential rate over time, then that mathematical quantity will become more and more disconnected from any physical reality.

Unfortunately, there is one mathematical quantity, central to our lives, of which we do demand that it grow at a steady exponential rate.  That quantity is money (and the exponential rate in question is the rate of interest).

So we should expect the financial sector - that part of the economy that deals directly with money - will become more and more disconnected from the part of the economy that deals with  physical "stuff".

Sound familiar?

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