Albert Einstein’s Little Secret

“The secret to creativity is knowing how to hide your sources.”—Albert Einstein

A few weeks ago, I stumbled upon an Einstein lecture by Douglas Hofstadter. He researches how we create analogies and how they permeate our languages and creative thought processes in physics and mathematics. In his research, he found that virtually every historical discovery was made by analogy. Newton, Poisson, Faraday, Ampere, Maxwell, Planck, Bohr, Sommerfeld, Schrodinger, Heisenberg, Dirac, Weyl, Fermi, Yukawa, Feynman, Yang-Mills, Schwinger, Glashow, Nambu, Gell-Mann, Weinberg, Salam…and even Einstein, which was the gist of his presentation.

According to the Encyclopedia of Human Behavior, Second Edition (2012), vol. 1, “Analogical Reasoning – the ability to perceive and use relational similarity between two situations or events – is a fundamental aspect of human cognition. Indeed, some researchers suggest that it is the crucial cognitive mechanism that most distinguishes human cognition from that of other intelligent species.
It is a core process in scientific discovery and problem-solving, as well as in categorization and decision-making” (p. 130).

Creating analogies involves making connections between situations in different domains by identifying a common relational system. It allows us to transfer learning from one domain to another and make inferences that lead to new knowledge. This is what Einstein did and practically every other known genius in mankind. In 1905, Einstein came up with an idea that energy and matter were different forms of the same thing and he identified their relationship as E = mc². In other words, energy is equal to the multiplication of mass (m) by the square of the speed of light.

What I noticed in my research is that Einstein’s theory of special relativity is similar to another theory that came from an economist named Henry Dunning Macleod. He was a rare maverick type, much like Einstein. Macleod was 58 years old when Einstein was born, but they lived on the planet together for 23 years. One of Macleod’s books, Theory of Credit, published when Albert Einstein was just 10 years old. In this book, Macleod shared some thought-provoking insights, such as money and credit being both wealth, but also being inverse and opposite each other, with money having a positive economic quantity and credit having a negative one.

In the same way that money and credit are related in Macleod’s theory, so is energy and matter (mass) in Einstein’s. They are both one in the same, inverse and opposite each other. Macleod published many books, including Elements of Economics, with the formula for calculating compound interest. It is said that Einstein was familiar with compound interest and coined it as the eighth wonder of the world. Einstein probably read Macleod’s work. It was Macleod who coined the term Gresham’s law, that bad money drives out good. In his book, The History of Economics, he wrote how his disappointment in the literature on economic “science” was his amazing opportunity:

I saw that the greatest opportunity that had come to any man since the days of Galileo had come to me, and I then determined to devote myself to the construction of a real science of Economics on the model of the already established physical sciences. Even then, from the study of these works, I could discern from Adam Smith, Ricardo, and especially Whately, that Economics is in reality the Science of Exchanges or of Com- merce, or the Theory of Value (p. 143).

I’m not sure why he chose the title that he did. One might expect a title like “The History of Economics” to be about the history of economics, but only a small portion of the book contains historical information. Nonetheless, he was quite proud of this work.

I have now laid bare the foundations of Economic Science. Like Botta and Layard at Nineveh; Schliemann at Troy, Argos, and Mycente; Petrie and many other explorers in Egypt—I have swept away the rubbish and folly which has accumulated over the doctrines of the ancients for centuries, and laid bare the solid and impregnable foundations upon which the majestic structure of Economic Science is to be erected.

Macleod believed that money must be based on debt, that credit and money go hand in hand. He defined currency as “evidence of services” in the form of exchangeable debts. In his mind, money was a social credit that relied on community trust—it derives its value from the community’s perception. He was a confident analogical thinker and diligent in his mission to explain the “science” behind economics. In his writing, Macleod made some intriguing analogies, breathing life into an otherwise monotonous field of study.

In his Theory of Credit, he wrote:

Credit in Economies is very much analogous to Gravity in mechanics. Gravity is force, pure and simple, dissociated from any material agency: and, for some time, some eminent men felt a difficulty in believing in it for that reason. Now, Credit is Exchangeability, pure and simple, dissociated from Labor and Materiality, arid, therefore, some persons even yet feel a difficulty in believing it to be Wealth. But Credit is Wealth just as Gravity is force.

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And as the produce of the mill is measured by the Quantity of the Motion of the engine: so the useful effect of Money and Credit is measured by their Quantity of Motion; which is called the Circulation. The Circulation, which is the sole test of their useful effect, is, therefore, the product of their amount multiplied into the velocity of their Circulation. The Quantity of Motion of the engine is called its Duty: hence the Circulation of Money and Credit may be termed its Duty.

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Doesn’t that second paragraph sound like Einstein? Einstein’s theory was Energy and Mass are two forms of the same thing, where ENERGY (E) is the multiplication of MASS (m) by the square of the speed of LIGHT (c)—(E = mc²). Macleod said that Money and Credit are two of forms of the same thing, measured by the quantity and velocity of currency in circulation. I’m not sure that I agree with either one, but this is beside the point. The point is Einstein’s logic seems to have come from Macleod. According to The Physicists’ View of Nature, Part 1: From Newton to Einstein by Amit Goswami (2012), Einstein’s logic is linked to the idea of money (exchange rates and currencies):

The primary physical idea that contributed to the new view of matter came from Einstein: mass is equivalent to energy. According to Einstein, matter—by virtue of its mass—is equivalent to an amount of energy, determined by a rate of exchange inflexibly fixed by nature. And energy, such as a beam of radiation, possesses mass by the same token. Mass and energy are like two different currencies. And the law E = mc² gives the rate of exchange between the two currencies.

I don’t understand how an object moving at the speed of light squared is energy. And I don’t understand why we need credit in a properly functioning monetary system, but I do understand how people tick. And I do understand how we form our own individual ideas from those of other people. So I’ve been thinking about the relationship between the two theories. Let’s recapitulate…

• E stands for energy
• m stands for an object’s mass, which is ρ × v, where, ρ = density and. v = the volume, or the quantity of matter present
• c² represents the speed of light (186,000 miles per second) multiplied by itself, and I’m not sure why light is mathematically represented by a “c” instead of an “l”

Could it be that MONEY (M) is the multiplication of CREDIT (C) by the velocity of CIRCULATION (M = Cv²)? Somehow I don’t think it’s that simple or easy to figure out, but perhaps I’m close, in my willingness to try. Macleod spends a good amount of time talking about Value. He makes it clear that he doesn’t think gold, silver, or anything else has value based in commodity, based in itself, but rather in the trust of people. However, he believes that the creation of money must be in sync with the creation of goods and services.

By virtue of the fact that Macleod makes analogies of credit and money to the workings of nature, through natural sciences like mechanics and astronomy, he indirectly suggests that economics is natural vs. manmade. So figuring out what is natural in our system and what is not, should give us a better picture of what we should do next. Unfortunately, Macleod and his work has largely disappeared from mainstream economics. He didn’t go down in history as famous like Einstein did. After writing numerous mind-twisting books, he quietly disappeared into the velocity of society while other less-brainy types became famous.

There’s a formula which economists use today that supposedly calculates the velocity of money. Have you heard of it? The velocity of money is calculated by dividing a country’s gross domestic product (GDP) by the total supply of money. This is taken as truth, only the GDP is not natural and its content has been changed by government over the years. Macleod said that Circulation is the ONLY TEST FOR THE USEFULNESS OF MONEY, and he calculated it as the total amount of currency multiplied into its velocity. To further explain this, Macleod used another analogy in his Theory of Credit:

The effect produced by any body in motion is measured by its weight or mass multiplied into its velocity: which is termed its Momentum. If the mass be diminished, yet by increasing the velocity, the effect or Momentum may still be the same. If a body weighing 100 lbs. move with a velocity 1, its momentum will be 100: but if we diminish the weight to 50 lbs., and can double its Velocity, the effect, or Momentum, will still be the same.

Takeaways:

Analogical Thinking—the making of mental analogies—is how you become a genius but it’s not how you become famous and go down in history, or even how you make money. You become famous by hiding your sources, or at least your mental processes, as Einstein so boldly said: “The secret to creativity is knowing how to hide your sources.” All famous geniuses, giants, stand on the shoulders of unrecognized and underappreciated people who are great.

Macleod was a banker, whose business is to broker lending and borrowing between the rich and poor. Money based on debt is quintessential in a society made up of rich people and poor people. It is not natural science, in my opinion. For the rich can only remain so if they can rely on the hard labor of the poor, and they do this through lending. Bankers are enablers of this sociological concept, which is as old as society itself. However, it is not “natural” and is therefore not science.

I have no proof, but I suspect that Einstein read Macleod’s work, as it would have been right up his ally as a physicist interested in economics. It may have actually influenced him in choosing his career and sorting out the way he thinks. To become great, you have to believe you can. In other words you need exorbitant confidence like Macleod. It is written that Einstein tended towards socialism, which also supports Macleod’s idea that money is a debt claim against society.

Macleod and Einstein both had something right, but they probably also had some things wrong in their thinking: at least one oversight of some sort. Macleod presumed it natural for society to be divided into rich and poor, when it is not. But what did Einstein presume? Does a brick flying at the speed of light squared really turn into pure weightless energy? I don’t know. Regardless of what they had right or wrong, or which one was famous and which one was not, I have great respect for them as human beings. Both were curious and nonconformists. They were independent thinkers and doers who propelled people to think, and made a difference in the world.

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