School of thought
TNT White Paper: A Legal Brief
By Joseph Mark Haykov
July 9, 2024
The purpose of this preface is to establish that the TNT white paper can be incorporated as an integral part of any legal brief, as it contains no hearsay. All our assertions and claims in any of our white papers about economics are fully evidence-based, ensuring their admissibility in a court of law.
Truth, in both reality and law, is defined in two ways: as a Boolean value—represented as a bit (0/1) in computation—and as the accuracy of claims about reality. For instance, “2+2=4” is a logical claim in algebra, whose truth value is Boolean. Such logical claims fall under Aristotle's law of excluded middle; they represent an assertion that can be true or false, with no other allowed values. That’s what a Boolean refers to as it pertains to an assertion, a statement, or a logical claim about reality whose value is so constrained. The statement or assertion that “2+2=4” theoretically holds true universally but does not always hold true in reality. Truth in reality is foundational in law, where factual evidence is admissible, and hearsay is strictly prohibited.
Hearsay, such as stating "2+2=4" without empirical backing, may be logically sound in algebra but can be false in reality if not evidence-based. For example, in reality, 2 apples + 2 apples = 4 apples, but 2 moons of Mars + 2 moons of Mars = 2 moons of Mars, as Mars only has 2 moons. This proves beyond a doubt the necessity for evidence-based assertions in legal contexts.
The TNT white paper makes legal claims calling for specific government actions designed to promote general welfare based on mathematical economics, utilizing the Arrow-Debreu framework. This framework is used by the Federal Reserve to set real-world interest rates. While some of our legal claims, like the “U=S+E” roles of money as a unit of account (U), a store of value (S), and a medium of exchange (E), may seem theoretical, they are evidence-based. Therefore, these claims cannot turn out to be false, akin to factual evidence presented in court, which cannot be false barring perjury.
Unlike facts, hearsay – even if it is completely honest and not perjured – can always turn out to be false, just as mathematical axioms that are considered "self-evidently true" often turn out to be false under unforeseen conditions. For example, hearsay is inadmissible in court precisely because "2+2" is not universally "4" in reality. In reality, 2+2 is 4 only under Peano's fifth axiom—the induction principle—which requires infinitely many countable objects, and this axiom is violated when counting the only two moons that Mars has.
Economic claims posited as axioms without proof should therefore be treated as hearsay in law on account of their inherent risk of turning out to be false. This is precisely why – just to be on the safe side – we explicitly exclude any and all hearsay from our analysis. The truth of each and every one of our evidence-based claims is independently verifiable, providing a reliable foundation for promoting general welfare through informed economic policies, without assuming or guessing. By excluding hearsay, our theoretical claims about welfare promotion are certain to remain true once established.
Truth in law—at the very least—excludes false accusations, as exemplified by Marx’s theories that led to disasters, such as cannibalism in 1920s Ukraine. Whatever you believe about socialism, we can assure you that no economic theory suggests that cannibalism is an efficient outcome, regardless of how you wish to redistribute the real GDP, or what you seek to produce. Truth in reality is defined as the real-world accuracy of a claim, and thus, any claims about reality that contradict factual evidence are false. This is why a man who truly believes he is Napoleon is legally deemed clinically insane and would typically be committed to a mental institution. This means the objective truth of a claim, defined by its real-world accuracy, must be independently verifiable. Hearsay does not qualify; only facts and logical deductions are infallible, as their truth can be verified independently by any third party.
Schools of Economic Thought: Understanding Unearned Wealth Extraction
Just as there are many different religions, there are numerous schools of economic thought, each offering unique "alternative-truth" subjective theories and perspectives that describe the same "one-truth" objective reality. In reality, while there are a multitude of religions, a small handful represent a set of theories that collectively account for what is subjectively perceived as the "one-objective" truth by the overwhelming majority of all currently living human beings. These religions include, but are not limited to, Atheism, Agnosticism, Christianity, Islam, Buddhism, Taoism, and Judaism. Despite this diversity, over 99% of the world's population adheres to the top seven or eight religions in terms of popularity, as suggested by the Pareto Principle.
Similarly, although numerous schools of economic thought exist, the predominant one in mainstream modern economic theory – akin to monotheism in religion – is mathematical economics, with the cornerstone being the Arrow-Debreu general equilibrium framework. However, Marxism-Leninism-Socialism remains surprisingly popular and is still widely practiced in countries like China and North Korea. In this sense, just as the vast majority of religions share certain common beliefs, so do all schools of economic thought, including Marxism. For instance, almost all religions (except for atheism – as practiced by communists – specifically Marxists – such as Lenin, Stalin, and Mao, whose belief system resulted in such dire real-life outcomes as cannibalism, death camps, and millions murdered) assert the existence of a higher intelligence, often referred to as God. Similarly, all schools of economic thought assert as an evidence based claim that unearned wealth extraction by unproductive "economic parasites" reduces efficiency.
It is an established fact—independently verifiable for accuracy and evidence-based—that robbery, theft, and fraud are detrimental to economic growth. For example, the prevalence of total lawlessness in Haiti facilitates involuntary exchange, such as robbery, which violates the unfettered exchange condition posited as necessary for achieving efficiency by the first welfare theorem of mathematical economics, the cornerstone of the Arrow-Debreu general equilibrium model of the economy. As a result, Haiti’s per capita GDP is roughly five times lower than that of the Dominican Republic. Marx’s entire argument is similarly rooted in the notion that economic inefficiency is caused by unearned wealth extraction by employers from labor (employees), in the form of surplus value. However, few people realize that modern mathematical economics offers far deeper, more accurate, and realistic theories about unearned wealth extraction than Marx’s early hypothesis.
Economic Agents and Utility Maximization
Mathematical economics, along with game theory, views an individual economic agent as a player in the game of "economic life," where the primary goal is to maximize subjective benefits (or utility). Representative agents are posited as rational, utility-maximizing consumer-producers. In mathematical economics, individuals participating in any transaction seek to maximize their own subjective utility or benefit. This rational, utility-maximizing behavior naturally extends to politicians who, like all other people, aim to maximize their own wealth—which provides future subjective utility—by engaging in rent-seeking activities in addition to performing their regular duties.
First, it is important to explain that while early economic theory conceptualized money primarily as a medium of exchange, necessary to solve the double coincidence of wants problem in direct barter, mathematical economics underscores money’s role as a unit of account in which prices are measured in a general equilibrium. When transactions are facilitated using money—as both a unit of account and a medium of exchange—the value of the transaction, measured by money as a unit of account, reduces our wealth, which represents our future ability to obtain utility without working.
In reality, money serves not only as a unit of account in which prices are measured but also as a unit of account in which the subjective use value—subjective utility or benefits to the consumer—of goods and services we purchase is compared to their exchange value—subjective costs we all face in our dual role in the economy as producers of labor we sell for wages. Typically, this is measured by the amount of time-labor it takes an individual—in their role as a producer—to earn enough wages—measured in money—to purchase the goods and services we all desire as consumers.
The use value (benefits) to a consumer of a purchase is related to the subjective costs of a purchase for a typical representative agent by dividing its price by one's hourly wages to estimate the real exchange value: one's subjective time/labor. Money, as a medium of exchange accepted as payment for all available goods and services in the marketplace, constrains the subjective utility one can obtain from using these goods and services. Thus, money naturally becomes a store of value, used to measure wealth, which constrains purchasing power. Purchasing power, in turn, defines how much subjective utility per unit of time is available to any particular individual.
Purchasing power, or equivalently, wealth, is not only measured by money as a unit of account but is also represented in reality by money in its role as a store of value (or wealth). Money determines how much utility any one of us is able to obtain daily without working until we die of old age. In fact, wealth measures future available subjective utility per unit of time (i.e., per day).
Individuals strive to accumulate wealth not only for immediate consumption but also to enhance their future utility and purchasing power. By maximizing our wealth, we maximize expected future subjective utility, ensuring that we can access greater benefits in the future. This alignment of economic activities with long-term well-being and goals is fundamental to rational behavior.
However, obtaining wealth or purchasing power without contributing to the production of real GDP that everyone collectively consumes is an economic inefficiency, no different in either theory or reality from rodents pilfering grain in a warehouse. This is why Gordon Tullock defined economic rents as wealth obtained without a reciprocal contribution to productivity by rent-seekers, or economic parasites, who consume without producing.
But how are these economic parasites able to extract unearned wealth from the rest of the participants in the economy according to modern economists, excluding the obvious examples of theft and robbery in places like Haiti?
Unearned Wealth Extraction, Barring Crime
Unearned wealth extraction occurs daily through various forms of crime, including theft, robbery, extortion, and collecting ransom—whether involving people or a computer's hard drive. These crimes allow perpetrators to consume goods and services without contributing to their production, aligning with the definition of rent-seeking in public choice theory.
Public choice theory, as developed by Tullock and Buchanan (1986 Nobel Prize), applies economic principles to political processes, analyzing how self-interested behavior influences decision-making in government. It explores how individuals in the public sector (politicians, bureaucrats) pursue their interests, sometimes leading to outcomes that do not maximize social welfare. Unearned wealth extraction occurs when these individuals use their positions to benefit themselves or specific groups at the expense of the general public.
Rent-seeking, according to public choice theory, involves efforts by individuals or firms to gain economic benefits through manipulation or exploitation of the political and economic environment rather than through productive economic activities. This includes lobbying for favorable regulations, subsidies, or tariffs that provide them with unearned wealth. Rent-seeking is inefficient because it diverts resources away from productive activities and creates economic inefficiencies, much like other forms of theft.
Another significant and related area of study pertains to asymmetric information and fraud. Akerlof's "The Market for 'Lemons'" describes how outright fraud facilitated by asymmetric information results in unearned wealth extraction—earning him a Nobel Prize. Potential fraud facilitated by asymmetric information, such as double spending Bitcoins or Bernie Madoff lying about his performance, is extremely costly to mitigate, as evidenced by Bitcoin mining consuming more energy annually than Argentina.
Agency costs, according to Jensen and Meckling’s most referenced paper in corporate finance, "Theory of the Firm," arise from conflicts of interest between principals (owners) and agents (managers or employees) in a company, owing to owners being asymmetrically informed about the quality of the agent’s labor. When agents act in their own self-interest rather than in the best interest of the principals, it can lead to unearned wealth extraction. Examples include excessive executive compensation, perks, or investment decisions that benefit managers at the expense of shareholders. This naturally also includes smaller-scale issues like employees pilfering office supplies. Agency costs can be mitigated through proper incentives and monitoring mechanisms to align the interests of agents with those of the principals.
Mathematical economics provides frameworks to understand how unearned wealth extraction occurs through the behavior of individuals in political and economic systems. Public choice theory highlights the self-interested actions of public officials, rent-seeking underscores the inefficiencies created by gaining wealth through non-productive means, and agency costs illustrate the conflicts within organizations that lead to misaligned interests and inefficient outcomes. Additionally, there is always the risk of fraud facilitated by asymmetric information, such as potential double spending of Bitcoins, CEOs cooking books (like Enron), Ponzi schemes in general, and so on. Together, these theories and the underlying phenomena explain the mechanisms and consequences of unearned wealth extraction in various contexts.
Axioms (Inadmissible Hearsay) vs Evidence-Based Claims (Admissible Facts)
Marx's early theory of wealth extraction is not only underdeveloped and trivially oversimplified by comparison, but also contains several false assumptions, which explains precisely why it is unworkable in reality and doomed to failure. However, we cannot blame Marx for this - his work was early and had bugs, just like the first version of the "GUI" developed by Xerox, which Steve Jobs then "borrowed" and turned into a second generation, much better and more refined product: the Mac. Similar to the early versions of technology, Marx's work is an early and buggy version of the more refined, accurate and bug-free "iPhone-like" model of the economy: mathematical economics, underpinned by the first and second welfare theorems.
We elaborate on this in more detail in the TNT white paper that follows. Most importantly, unlike the false accusations of wealth extraction that Marx made—causing all sorts of real-world troubles—all assertions or claims we make, including those in the TNT paper about the workings of any economy, are evidence-based assertions that no school of economics would dispute, as even Marxists generally would not dispute verifiable empirical facts.
It is for this very reason that all the claims we make in any of our legal briefs (and in any of our mathematical economics white papers) are fully evidence-based, specifically excluding any hearsay, which are merely unproven assertions. For example, the claim that "holding everything else equal, raising the minimum wage (price of labor) reduces the consumption of labor, causing increased unemployment" would be classified in our legal brief as hearsay, owing to the fact that while this claim is generally true, it does not hold true universally (akin to 2+2=4), as it is a well-known fact that increased prices produce an income effect, in addition to the substitution effect.
A claim that is evidence-based and not hearsay is that under the first welfare theorem of mathematical economics, raising the minimum wage is guaranteed to reduce general welfare. This is because imposing a minimum wage acts as a real-world binding constraint on the real-world gradient descent optimization that results in a theoretical Pareto-efficient equilibrium as per Arrow and Debreu. Imposing the minimum wage—a binding constraint on gradient descent optimization—reduces the amount of Pareto-improving free trade and thus is certain to result in an overall welfare reduction. Unlike the Austrian claim, which is nothing but hearsay, our claim based on the first welfare theorem of mathematical economics cannot turn out to be false, barring the first welfare theorem itself being violated, such as by involuntary or asymmetrically informed exchange that results in fraud, as per Akerlof.
While the substitution effect will lead employers to hire less labor, the income effect impacts workers, such as laid-off female waitresses who may be forced to take on less desirable but higher-paid jobs, such as stripping. In this sense, raising the minimum wage does not necessarily increase unemployment but can push women into unwilling prostitution. But we are not here to talk about forced prostitution through imposing minimum wage laws; it is up to consenting willing adults to do with their bodies as they choose.
Let us discuss the monstrosity that is Bitcoin—an unregulated, ransomware-facilitating, electricity-wasting, insecure, terrible monstrosity. We offer a far superior product, TNT, that enables full regulatory AML compliance on crypto, while burning no electricity, and making theft impossible, but FBI confiscation easy. The reason why we can make statements like this is that, just as in libel law, truth is our absolute defense. The reason why we are willing to put our head out on the line like this is that we are provably right!
Unlike axioms, which are accepted without proof because they appear self-evidently true but could always turn out to be false, the evidence-based claims in the TNT white paper are based on independently verifiable empirical facts. For example, the statement "the Earth is round, and it orbits the Sun" is an empirical fact that cannot possibly turn out to be false, barring singularly unlikely scenarios like mass hallucinations or extreme drug abuse. The same is true of the TNT white paper, as all logical claims in it are evidence-based. By excluding hearsay from our economic analysis, we can produce a white paper admissible in court as a legal brief, on account of excluding all hearsay and only relying on evidence-based claims (or facts) and logical deduction.
Hearsay vs. Heresy: Understanding the Intersection
Hearsay refers to repeating something you have only heard second or third hand, making hearsay evidence inadmissible in a court of law, as it is little more than gossip. Heresy, on the other hand, is going against the teachings or accepted wisdom of society, one's religion, or the people around you.
What we are suggesting here is that these two concepts are, in fact, identical. Just because many people believe that 2+2=4 does not mean it is always true in reality. Both are examples of dogma—theoretical claims about reality that most of us are firmly convinced are always true but could turn out to be false.
In law and in reality, hearsay is rejected in court because it is unreliable; it cannot be independently verified and often changes as it is passed along, much like the game of telephone. Similarly, heresy challenges and seeks to reject established beliefs or doctrines that the heretic believes to be objectively false, questioning their validity despite widespread acceptance.
Both concepts highlight the fallibility of commonly held beliefs. Hearsay shows how easily information can be distorted, while heresy emphasizes the importance of questioning and critically examining widely accepted truths. By recognizing that all dogma—regardless of how many people mistakenly agree with it—is susceptible to error, we can appreciate the need for evidence-based claims and the value of challenging assumptions in the pursuit of truth.
In summary, we wish to emphasize that not only could hearsay always turn out to be false, but also heresy could always turn out to be true. For this reason, we should—and usually do—only accept as objectively true those claims whose accuracy is independently verifiable, which unfortunately limits our subset of assertions in whose truth we can be absolutely certain to those logical claims that are evidence-based—such as empirical facts—or derived through deductive rational reasoning. The truth of such claims is independently verifiable, meaning these claims cannot turn out to be false.