Money and thermodynamics

Here's an addendum to Sunday's show on financial scams. It's a thought that I had while preparing the topic, but didn't wind up using while on the air.

Your financial situation is a lot like the second law of thermodynamics -- a concept which creationists frequently and (perhaps) deliberately misunderstand. The second law of thermodynamics deals with entropy, which is hard to explain in abstract terms, but it is often described as "chaos." It is a function of the amount of energy in a system which is no longer available to do work.

In a closed system, entropy always increases, which means that orderliness is being drained away all the time. The only way to restore that order is to bring new energy into the system which can do work. Here on earth, the sun is always shining down, bringing new energy from space. That energy is absorbed by plants, which are eaten by herbivores, which are both eaten by people, which channel that energy into creating orderly things. If all the people in the world were to disappear tomorrow, within a very short time our buildings would decay and rust, and eventually fall down. What is biodegradable would be eaten by bacteria. And so on. Keeping our civilization going takes work.

The sun provides "free energy" for us and so powers order and life and yes, evolution too. Eventually the sun will burn out, but this is too far in the future for us to care about that problem right now. You can't just keep spend energy without bringing more of it in: if the sun vanished, all life on earth would likely be dead in a matter of days. It doesn't matter how clever our science is at that point; without new energy coming in, you can only shuffle existing energy around for so long before using it up.

In your personal life, money plays a similar role to order. Most of the things you do as a citizen of the 21st century require money in some way. Keeping a roof over your head costs money, or it costs somebody else money (if, for example, you live with your parents). Feeding yourself costs money. Traveling around costs money. The highways and buildings that keep our economy running cost money to maintain.

So in order to keep this system afloat, we have to do new things all the time that generate wealth. At a basic level, we have to grow enough food to feed everyone. We have to build houses, and create roads. At a less crucial level, we give each other reasons to go on living when we create art and design cool technology and educate one another. These are the things that we do that are of lasting value to our species, and they are things that are worth paying for.

A financial scam is the economic equivalent of a perpetual motion machine. Scam artists will tell you that you can get your money for nothing (and, as Dire Straits tells us, your chicks for free). They say that if you mail their chain letter to other people, or build your downline as an Amway distributor, or hype up Liberty Dollars, or "pay the processing fee" to release the funds from your rich uncle in Nigeria, then you'll get money without doing work.

Thanks to thermodynamics, we know that perpetual motion machines don't work, and that anyone who claims to have built one is a charlatan. In order to create motion, you have to spend new energy. In order to keep a lifestyle going, you have to do something of value that brings in new money. In other words, an economic closed system is guaranteed to burn itself out sooner or later.

In a nutshell, that is what I mean when I say that you should always approach a new financial opportunity by asking: "Where is this money coming from?"