Thursday, October 3, 2013
Does God Play Dice With the Universe?
Albert Einstein is famously quoted as saying, “God does not play dice with the universe.” Since Einstein was in all probability an atheist, what did he mean? In fact he was arguing against quantum mechanics, a theory that was probabilistic in nature. He believed that somewhere there was an underlying theorem that would explain certain phenomena in a unified mathematically deterministic formula. If such a formula exists, we haven’t found it. It seems for better or worse the universe contains an element of randomness. In the study of mechanical engineering we are taught that thermodynamics and the properties of gases (such as steam) can be best explained by probability. While the relationship of temperature and pressure within a vessel of a given size can be predicted with accuracy, the random motion of the individual molecules within the container is unpredictable. Likewise in studying radioactive decay, scientists have learned that while they can predict the total decay of a given sample of an isotope over time, they are unable to predict the decay of a single unstable atom in a controlled environment. I think we understand this principle. A balanced coin flipped a large number of times will turn up 50% heads and 50% tails. However, no one can predict the outcome of a particular coin flipping event with 100% accuracy. I am a Christian. I believe in a God whose Son said, “What is the price of two sparrows--one copper coin? But not a single sparrow can fall to the ground without your Father knowing it.” The sparrow still died. Was that a random event or was it ordained by God? I teach that there is a high probability that if you work hard, spend less money than you make, and invest that surplus in a wise manner over an extended period of time you will prosper. I can not make any guarantees. No one can. If anyone makes those kinds of promises they are either a liar or a fool. In either case, run away from them if they ask you for money. Not only do we live in a world that contains an element of randomness, it is also at times a very nonlinear world. Very small differences in initial conditions, such as the exact date you choose to buy a particular stock, can produce radically different results over an extended period of time. Modern portfolio theory (MPT) teaches that it is more important to diversify in order to limit risk than it is to try to maximize the return on your investment. The basis of this theory is termed, “a random walk.” This means that the price of a particular share on a given day moves in a random pattern about its “true” value. In the long run there is pretty good evidence this is an accurate description of the market. However, the theory assumes that the probability of a share price moving more than 10 or 20 times the average daily move in a particular day is diminishing small. Even excluding events like the declaration of war or fraudulent activities such as insider trading, Benoit Mandelbrot has demonstrated that the market is a much more dangerous place than is predicted by modern portfolio theory. MPT predicts that changes in the stock market can be described by a Gaussian distribution with “thin tails.” That means, extreme events (good or bad) are very unlikely. The truth is we can expect a significant stock market crash about once every ten years, more often than can be explained by MPT. However, Martin Hutchinson notes, that Mandelbrot’s study of cotton prices demonstrated that they, “obeyed a Pareto-Levy distribution with an alpha of 1.7 instead of the bell cure alpha of 2.0.” The bottom line to someone like me who has not studied these mathematics in any kind of depth (although I have read one of Mandelbrot’s papers on this subject) is that the market can and does move as much in a matter or minutes or even seconds as one would expect in years. We do live in an unpredictable world, but not in a world without natural and spiritual laws. Drop an iron ball from the leaning tower of Pisa; Newtonian physics can predict the results of your experiments to the limit of your instrumentation. Determining the exact outcome of a particular life is beyond my ability. I can only make probabilistic statements like, “If you drive your Porsche at speeds in excess of 70 mph on a back country road with a speed limit of 30 mph under the influence of alcohol, there is a high probability your vehicle will come to rest, wrapped around a tree.” This actually happened to someone I know. If I obey the speed limit, wear my new driving glasses (for the first time I failed the vision test), and drive defensively there is a high probability I will avoid a serious accident, but no guarantees. Seek wisdom. Live righteously to the best of your understanding and ability. Find ways to share love and happiness in this unhappy world. Martin Luther Quote: “Pray like it all depends on God, then when you are done, go work like it all depends on you.”