Balance of profit and loss

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In the nervous system, the balance of excitation and inhibition is extremely important.

This is true on multiple levels: from molecular (involving control of appropriate gene expression), to intracellular (involving homeostatic balance between strengthened and weakened synapses, ability for synapses to potentiate on the one hand and runaway excitation not to happen on the other), to circuit (balance between excitatory and inhibitory inputs and excitatory and inhibitory networks), to systems (competition and cooperation between multiple systems — e.g., in control and planning of movement execution or in the case of multiple memory systems).

So, on the one hand, you want to be able to activate a gene, strengthen a synaptic connection, depolarize a particular sub-class of neurons, run a wave of excitation through a circuit and send information from area A to area B. On the other hand, you also want to be able to control these processes and reverse them. Not only in the long term, but in the short term as well.

Not only do you want to stop yourself sometimes from saying the first thing that came to your mind or remembering every single detail of your everyday experience, but you also need inhibition in order to do the saying, the moving, the sensing and the remembering. Meaning, in order to move to X, you need to supress movement to Y and Z. In order to pay attention to A, you need to ignore B–Z. In order for neurons to organize themselves and send coherent information like little Napoleonic soldiers firing all at once, you need to prevent neurons firing “out of phase”. All of this is accomplished by inhibition.

Mess this delicate balance up — and you get diseases like schizophrenia, Parkinson’s, epilepsy, autism (and autism-specter disorders), different developmental and mental problems and so on. People know that in schizophrenia, patients get dillusions, being unable to perceive the difference between information coming from the “inside” and from the “outside”. What is less know is that schizophreniacs simply cannot “think straight”. Their internal logic is messed up. The hypothesized reason is that their cortical excitatory neurons fire out of phase. Why? Because the inhibitory neurons don’t inhibit enough.

In economics, the balance between loss and profit is no less important. In fact —

Bailouts attempt to erase the effects of losses, or economic failure. But, writes Tyler Watts, such efforts inevitably undermine the loss aspect of “profit and loss”. Profit and loss go together — like up and down, left and right, good and bad. If we try to do away with losses, we’ll wind up diluting the meaning of profits. [Read on...]

A more detailed and organized article by classic Austrian economist Ludwig von Mises on the function of profit and loss in free economy can be found here.

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I am not going for the whole discussion of “can’t have chessed without gevurah” or “Havaya Hu ha’Elokim” and so on. It’s obvious. It’s been discussed many times. And I am exhausted (Rashbam was very wordy). Just read this.