
Ask HN: Finance from first principles? - olalonde
Does anyone know a book&#x2F;resource that explains major financial concepts from &quot;first principles&quot;<p>I&#x27;m not looking for a book on investing. I&#x27;m looking for something much lower level, that dives into the inner-workings of financial systems and how those systems have evolved over time.<p>To make an analogy with computing, I&#x27;m looking for something like SICP or &quot;The Elements of Computing Systems&quot; but for finance.
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automatwon
No. But I can recommend a book that, through first principles and thought
experiment, fortified my belief that efficient allocation of resources can be
net positive for society. Nowadays, many people, it seems, feel Finance is a
zero sum game where Financiers are net positive, while society at large is net
negative.

The book 'Wealth of Nation' by Adam Smith covers the allocation of human
capital. Adam Smith argues the ultimate resource being allocated here, really,
is time, and how individual's spend their time. When we measure output in
dollars, what we're examining is the money value of time.

It's hard to get someone to agree that Finance can be a positive-sum game, if
they refuse to accept that society is better off through the efficient
allocation of human capital / time. Someone faulted me for being "greedy" and
"selfish" to be a programmer in Silicon Valley. That by donating money to the
Syrian crisis, I was merely "paying off the debt that you created". They
insist I quit my job and go protest the United States government to allow
Syrian refugees in. They suggest I quit my job, move to a 3rd world country,
and help poor children. I sleep well at night because I read Wealth of
Nations. I believe there is no place in the world that is comparable to
Silicon Valley. Here, my skills / knowledge as a programmer is fully utilized.
As such, I maximize my money, and, should I choose, donate money to causes I
care about, to employ people who are more efficient at humanitarian efforts,
but not necessarily programming.

Finance allocates money, which, we hope, leads to production of goods /
services / jobs. The most efficient allocation of money is the one that
produces the most. From first principles, I don't see anything inherently
wrong with Finance. By putting money to work over time, rather than lay
stagnant, Finance can be viewed as the time value of money. As a society, we'd
want Finance and Financiers who help economies grow by efficient allocation of
money.

This dichotomy of money-value-of-time versus time-value-of-money is not an
original thought of mine. I was first exposed to this idea from a Finance PhD
candidate's thought about their program. I couldn't find the article on
Google. It'd be great if someone can link to it.

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twoquestions
Good luck with that.

To be as pithy as I possibly can, finance is basically politics with numbers
attached. Studying history has given me a great insight as to how and why
modern financial systems work.

Be careful what books you read in your search, more than a few are rhetoric
that's shaped like education.

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itamarst
[http://www.leftbusinessobserver.com/WSDownload.html](http://www.leftbusinessobserver.com/WSDownload.html)

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sebg
Happy to answer questions - what specifically do you want to know?

