We will continue where we left- the conservation of energy means energy can neither be created nor destroyed within a closed system. We will again discuss why this must imply a conservation of risk also exists for a closed system.
ALL life on this planet needs energy to survive. Without it, all life would die. The acquisition of energy for food, warmth, shelter, procreation, etc... is therefore of primary concern to all life forms. If a life form is unable to acquire enough energy to meet its needs, it must either reduce energy consumption or it will die.
This issue therefore creates a kind of risk situation for organisms.
Before I continue I will therefore define a few terms. In particular, I would like to define the term risk, and distinguish it from the term uncertainty. Risk can be defined as the “the threat or probability that an action or event, will adversely or beneficially affect an organisms' or an organization's ability to achieve its objectives”.
The risk situation surrounding an organism's energy requirements is therefore something I shall call energy risk and I will define it the following way: energy Risk is the risk an organism faces when it attempts to create an information structure. Energy risk can be thought of as the risk doing something will cost more energy to produce than it will ultimately pay back to an organism.
... Notice I used the term- "information structure".
I will come back to the idea of information structures in later postings but to give a basic working definition: information structures are basically everything we know or understand. Think of them as the scientific community's equivalent of the linguist's noun. Information structures are things like people, places, "things", networks, society, friendship, literature, love, emotion. Indeed anything you can think of is basically an information structure or almost by definition you couldn't think of it in the first place.
So remember how I defined energy risk and remember the conservation of energy?
Since (for closed systems) energy can only be changed from one form to another, but never created nor destroyed, if an organism were to create an information structure than could lower its energy risk forever, it could in effect create an information structure that would create energy forever. Since energy cannot be created forever, energy risk also implies that risk itself must be conserved. In effect risk can never be created nor destroyed for a closed system- it can only be changed from one form to another... Or as Cotton succinctly put it the other day: "risk can't be destroyed, it can only be mitigated".
It most certainly applies to things like CDO, ABS, etc... but it actually applies to everything else- and I mean everything.
Next posting- Part III, we will describe its relation to that favorite game theory dilemma of mine- The Tragedy of the Commons.
China Has To Grow Up
4 weeks ago