20 Years Ago John Nash Re-defined Our Understanding Of Economics (Again) and We Still Haven’t Realized It
I’m going to paint a picture for us that is going to get me labeled as “crazy” but I’m thinking its necessary to go all the way with this line of thought whether it turns out to be accurate or not (in some ways I already know its accurate since its based on facts that I myself have seen with citations and references).In short, the movie A beautiful Mind starring Russel Crowe, about a mathematician named John Nash who descended into mental illness before being recognized as one of the greatest minds that ever lived, is not historically accurate and the ACTUAL events that took place in this mans life are incredibly significant TODAY.
One such example of CURIOUS inaccuracy is in a scene of the movie in which Nash’s wife Alicia shows Nash “evidence” that the letters he sent to the government intelligence agency he claimed to secretly work for were never sent or received:
She was hoping this would wake him up out of his delusional state. But the truth of the matter is, and this is commonly accepted in his biography, Nash HAD sent letters that WERE received by the NSA, Rand, and other partitions of the US government and intelligence agencies and these letters were made public by the NSA years later.
Moreover these letters turned out to be incredibly insightful and significant:
In his letters, Nash anticipated the birth of complexity theory a decade later, and the birth of modern cryptography two decades later.
Furthermore a quick scan of Nash’s wiki turns up a cited paragraph explaining that he DID have a form of top-secret security clearance with RAND (and that he WAS targeted by the government for charges that were later dropped):
In Santa Monica, California in 1954, while in his 20s, Nash was arrested for indecent exposure in a sting operation targeting homosexual men.[46] Although the charges were dropped, he was stripped of his top-secret security clearance and fired from RAND Corporation, where he had worked as a consultant.[47]
Another curious inaccuracy in this movie is that it portrays Nash as taking medication to get better, when in fact it is well known that medication did NOT play a crucial in his release from hospitalization or his recovery (and Nash is NOT a fan of such medication). Whenever Nash’s illness and recovery are discussed in regard to his biography there is always a very curious caution to it:
After his final hospital discharge in 1970, Nash lived in de Lardé’s house as a boarder. This stability seemed to help him, and he learned how to consciously discard his paranoid delusions.[50]
What does it mean to learn to consciously discard delusions?
Here we can read it in Nash’s own words:
But after my return to the dream-like delusional hypotheses in the later 60s I became a person of delusionally influenced thinking but of relatively moderate behavior and thus tended to avoid hospitalization and the direct attention of psychiatrists.
Thus further time passed. Then gradually I began to intellectually reject some of the delusionally influenced lines of thinking which had been characteristic of my orientation. This began, most recognizably, with the rejection of politically oriented thinking as essentially a hopeless waste of intellectual effort. So at the present time I seem to be thinking rationally again in the style that is characteristic of scientists.[9]
Notice how he expresses his illness, as if he was expressing himself politically causing friction with society, and that he change his delivery in a way “…that is characteristic of scientists”.
I’ve listened to every John Nash interview I can find. He ALWAYS talks about his illness like that. He never flat out admits that he was mentally ill by his own standards, rather he always explains his “delusionary periods” as if he was simply having difficulty fitting in.
What is also significant about these periods of “mental illness” was that Nash came up with many ground breaking solutions that pervaded pretty much all of the sciences that exist today. And it took nearly 40 years for him to finally get recognized for it with a nobel prize.
Before his delusional episodes Nash was excelling at mathematical discovery at an unbelievable pace. Even well established mathematicians are in complete awe of Nash’s insights:
French mathematician Cedric Villani said this of one of Nash’s proofs:
…and little by little, specialists were becoming more to the point…and…he was putting everybody to contribution, as a conductor you know, “Hey my friend I need you to prove this and this. I think that you are the expert and you can give me this I can use it to prove something more…” As a conductor who would give assignments you know, “Here you are the violin player you play this and this. You are the trumpet you play this and this.” Each one does their part, nobody understands the great plan except when the orchestra starts to play. And Nash had the whole plan for this. And everyone was amazed when it was 6 months the was…putting all the people to contribution Everyone knows this as the Nash inequality. The truth is Nash didn’t prove this inequality. He asked one of his colleges…to prove the inequality …an expert in this kind of things. “You want this inequality, yeah let me prove it for you, here’s how you do it” “Thank you.” And Nash would use it in that problem of distribution. He was a genius in these kind of integrating parts…
This wasn’t a complete surprise for those around him as he was admitted to Princeton at 19 with a recommendation letter that literally explained, “He is a mathematical genius.”:
Currently it is trending on the internet that his paper “Equilibrium points in n-person games” is the greatest scientific paper ever published and Nash was 21when it was published. That same year he earned his Ph.D. with a 28 page dissertation on non-cooperative games that had only 2 citations, one of which was his own paper on equilibrium points in n-person games.
Nash never really stopped presenting incredible solutions to problems that just mystified many of the otherwise most brilliant men of his time:
Mikhail Leonidovich Gromov writes about Nash’s work: “Nash was solving classical mathematical problems, difficult problems, something that nobody else was able to do, not even to imagine how to do it. … But what Nash discovered in the course of his constructions of isometric embeddings is far from ‘classical’ — it is something that brings about a dramatic alteration of our understanding of the basic logic of analysis and differential geometry. Judging from the classical perspective, what Nash has achieved in his papers is as impossible as the story of his life… [H]is work on isometric immersions…opened a new world of mathematics that stretches in front of our eyes in yet unknown directions and still waits to be explored.”
And he admits himself (which is also verifiable if you think his mind can’t be trusted to remember) that he DID in fact continue to have such insights, at least in between bouts of delusional periods:
I spent times of the order of five to eight months in hospitals in New Jersey, always on an involuntary basis and always attempting a legal argument for release. And it did happen that when I had been long enough hospitalized that I would finally renounce my delusional hypotheses and revert to thinking of myself as a human of more conventional circumstances and return to mathematical research. In these interludes of, as it were, enforced rationality, I did succeed in doing some respectable mathematical research. Thus there came about the research for “Le problème de Cauchy pour les équations différentielles d’un fluide général”; the idea that Prof. Hironaka called “the Nash blowing-up transformation”; and those of “Arc Structure of Singularities” and “Analyticity of Solutions of Implicit Function Problems with Analytic Data”.
He almost mocks his own style of thinking, but admits only that he learned to fit in.
In 1994 he wrote:
But after my return to the dream-like delusional hypotheses in the later 60s I became a person of delusionally influenced thinking but of relatively moderate behavior and thus tended to avoid hospitalization and the direct attention of psychiatrists.
And it is said by 1995 he was considered “sane” again:
By 1995, however, even though he was “thinking rationally again in the style that is characteristic of scientists,” he said he felt more limited.[9][35]
This is interesting timing, because this is the year it seems Nash began to publicly talk about his proposal for “Ideal Money” which is a lecture supported by a paper of the same name that was published in the Southern Economic Journal in 2002.
So what did Nash do since 1995 when he “magically” gained his sanity back (notice my tone just changed there)?
He spent that last 20 years of his life (he passed away in a vehicle accident with his wife in May 2015) touring country to country and giving lectures on the topic of Ideal Money, and meditating on the subject which he expressed through various writings:
It is Ideal Money, I argue, that is his REAL defining work, and that we are simply yet to discover the value of it. But there is more…
In all my researching I have not found anyone that has read anywhere near the entire volume of papers Nash put out on the subject of Ideal Money. I also haven’t found any sincere persons that admit to having even a decent understanding of Nash’s proposal (this stands to reason since it seems no one has even traversed the material). I myself found some of these versions of Ideal Money digging around on Nash’s public home page (it just kinda seemed like he wanted someone to find them) and to my knowledge no one else really knew they were there.
There are some other very curious little notes he left on his homepage as well, one is an admission that he had built a program that could search for the next prime number, and this note about how he had a fear of consulting others on some ideas he was having:
I am speaking about a research project that is not fully complete since I have not yet written up and submitted for publication any paper or papers describing the work. Also the details of what axioms to use and how to select the basic set theory underlying the hierarchical extension to be constructed are not fully crystallized. I have also a great fear of possible error in studying topics in this area. It is not rare, historically, for systems to be proposed that are either inconsistent or that have unexpected weaknesses. So I feel that I must be cautious and proceed without rushing to a goal. And this psychology of fear has also inhibited me from consulting other persons expert in logic before I could feel that I had gotten my own ideas into good shape.
Here is where things get even more interesting.
Ideal Money is a concept that Nash came up with in the ‘60’s when he fled to Europe. He was planning on denouncing his American citizenship and was wanting to exchange his American dollar for the Swiss franc. The Navy, he says, tracked him down and took him back to America in chains.
Nash was running around at one point claiming the anti-communist and communist governments were colluding against the people. One can imagine how this wouldn’t go over very well, especially back in those times (Cold war).
But even though Nash’s illness faded and he was declared stable again by doctors, family, academia, the general public, and the nobel prize committee (or perhaps not because the committee had concerns about his ability to accept such an award) he never actually left go of the declaration that the different forms of governments work against its own citizenry.
In fact the closing section of Ideal Money compares the notion of (Keynesian) central banking is comparable to Bolshevik communism:
The Keynesians implicitly always have the argument that some good managers can do things of beneficial value, operating with the treasury and the central bank…I see this as analogous how the “Bolshevik Communists” were claiming to provide something much better than the “Bourgeois democracy”.
…while they have claimed to be operating for high and noble objective of general welfare what is clearly true is that they have made it easier for government to “print money”.
So what was it then? Was Nash not delusional then, or was he still delusional up until he died?
To answer that we have to understand the argument Nash proposes in Ideal Money, which is difficult to do because Nash has a very awkward, old school, long winded, tangential, full of side streets, leaps of logic with no apologies, style. He often alludes to people or events without explaining the subtle underlying meaning of the reference (this I have learned over the years of “googling” different names and phrases he uses). He’s very clever in this way and he is also known to be a world class troll, which means there is often double or multiple meanings to the way he phrases what he says and writes.
His letters to the NSA had this quality. He wrote the NSA and told them he sent a machine design to RAND and that he was proposing an effectively unbreakable cipher machine. But more than that he explained that a conjecture in which, even though he can’t prove it, there is some certainty in his mind that encryption will out race decryption in the long run. Nash felt this was an incredibly significant insight that should be kept secret from “enemies”. He also suggested that the US should want to ascertain the level of knowledge of this conjecture from competing nations.
The NSA wrote back to tell Nash they hadn’t received word of the machine from RAND. They asked a few questions and then eventually said they could have no further communication and wouldn’t be able to tell him about whether or not they would be implementing his ideas.
I think maybe Nash was being very young and cocky. I also think Nash understood the significance of what he knew. And I don’t think we’ve realized the significance what he knew, even today.
Let me explain.
In 1954 Nash wrote this memorandum on a decentralized computing system that ran with highly parallel control. He rambles off some basic ideas for the design and ends with some discussion about computers that could solve problems man couldn’t hope to solve otherwise. The insight Nash concludes with is that the human brain must work in this highly parallel fashion (what is interesting and relevant to Nash’s life is that he also describes how this machine could heal itself):
It is interesting to consider what a thinking machine will be like. It seems clear that as soon as the machines become able to solve intellectual problems of the highest difficultly which can be solve by humans they will be able to solve most of the problems enormously faster than a human
In closing, the human brain is a highly parallel setup. It has to be.
The point I want to make is we still don’t have this technology and Nash was only about 25 at the time he wrote this paper (remember in the movie all of this was part of his delusions!).
A little recap. In his early twenties Nash solved 2 player games, n-player games, came up with a conjecture for unbreakable encryption, and proposed basic design philosophy for a highly parallel and decentralized computing system (AI), technology we still don’t have today.
He also put forth the Bargaining Problem (and his solution imbedding Riemannian manifolds which isn’t so relevant at the moment).
The bargaining problem is an interesting paper because it is relatively simple. You can sort of understand how someone who was only a few years earlier just a teenager, might have come up with a solution to such an important problem. The basic idea is there are two players that each have different preferences for a set of items. It is said Nash’s youth shows in the paper because the of the items he chose such as a ball, a toy, and a knife. The paper effectively explores the efficiency of money in trade.
This paper is special to me. Because when I couldn’t understand what Ideal Money was about, after reading it multiple times, I was sitting there one day meditating on the bargaining problem, asking myself something I’m SURE Nash was asking himself immediately after he came up with the solution for the paper-what is the NEXT evolution of money?
That’s when I was stuck with the insight I think HE was struck with (but more than 50 years earlier).
Here is a young man, and the world doesn’t know this, but he does, and he’s already solved all games (which is perfectly applicable to war games), he’s already informed his government that he is leagues beyond them in encryption and complexity theory, he’s got a general design for AI in mind, and he’s beginning to explore the concept and value of money to our society.
And then he snaps?!
He gets super paranoid and starts claiming the different governments are colluding against the people and he is going to be our savior like Jesus or Muhammad (he also makes references to both religions in Ideal Money).
He comes up with the concept for Ideal Money and flees to Europe to denounce his citizenship and exchange his USD for the Swiss Franc because he believes it to be of better long term quality.
He’s tracked down by the US government and brought back, and then admittedly and in his own words as I quoted earlier in this article he learned to fit in to society enough that he was no longer forcibly confined in a mental institution.
He spent his time quietly at Princeton University earning the name “the phantom of fine hall” which is where he was said to have spent much of his time.
What was he doing with his time?
From 1995 up until his death Nash was a vocal proponent of what he described as “Ideal Money”.
But what is Ideal Money?
I can paraphrase his argument by saying that Nash suggests that an international e-currency with a stably issued supply will arise to compete with each national respective fiat currency. This competition in turn will solve a problem of otherwise self-interested banking practices because the central banks will now be FORCED to serve their “customers” otherwise they will lose them to a better option.
What’s more, Nash explains that by having a “good” option as an alternative the citizens and markets will begin to naturally force banks to print money of a superior quality. Nash relates and compares this quality to an optimally chosen basket of international commodity prices he calls an ICPI-something that can’t necessarily be created because of the political implications and corruptibility.
There are three key points here, firstly without the concept of the ICPI its difficult to explain what he specifically means in regard to “good” or “ideal” quality. Gold is an example of what has historically served as a “good” money, whereas the fiat money we are served today would be viewed as lesser in quality since it would not remain stable versus an ICPI.
Ideal: existing only in the imagination…
The 2nd key point is that “ideal” means “conceptual”. This is where Nash was very clever, and I’m starting to feel like no one is ever going to understand what he did. Everyone is looking for Nash’s ICPI and how it could possibly be constructed, but Nash is simply using it as a (conceptual) device for dialogue with himself.
The 3rd point is that there IS in fact a limit to the “idealness” of a money in regard to its quality (remember Nash is specifically speaking to HIS definition of quality). That is to say, he predicts, our money systems will begin to asymptotically limit towards this ceiling. This limit, or the concept of it, he surmises will bring our collective awareness to a unit of value that is stable for a “very long” period of time.
…if it is viewed scientifically and rationally (which is psychologically difficult!) that money should have the function of a standard of measurement and thus that it should become comparable to the watt or the hour or a degree of temperature.
That unit of value, is something we have been chasing since the dawn of man, since it is to be the bedrock of all nations functioning on the same (unpardonable and incorruptible) page. It is a unit created not by the competition of armies of nations on the battlefield, but of the competition of the CURRENCIES of their respective nations that arose on a higher order to solve the problem of society that cannot otherwise be solved (effectively the optimal distribution of commodities).
He predicts, and this speaks to the comparison of anti-communist and communist governments, this will wholly changes our banking system and take the power from central banks to arbitrarily print money, all because of “alternative options” for savings:
…this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of citizens in the “great democracies” that they should be better situated to be able to understand whatever will be the monetary policies which, indeed, are typically of great importance to citizens who may have alternative options for where to place their “savings”.
Nash’s Ideal Money re-solves a problem that is central to the optimal function of our society. My claim here is that his insight will eventually be seen to have brought peace to our conflicting nations. If you know the context of this entire article you can see this and understand it in every interview he gives and every facial expression he makes (watch at the end of this documentary @ 54m — 55m his double look after he talks about a future where a miracle could happen):
