Where Have you Gone Lysander Spooner?

Recently I’ve been fascinated by microcredit, and currency exchange. In the quest for more knowledge I was talking to someone who actually has a masters in finance. I threw out the analogy that banking is to microfinance as Newtonian physics is to Quantum physics. The idea being that the laws of finance change when the dollar amounts get small.

He wasn’t fully sold on it because fundamentally risk modeling is the same for big and large. But he threw out the idea that Newtonian physics might be used to describe finances of $1m and up, whereas microcredit finance would be more like an electron cloud with probability describing the electron’s movement.

I like that. The analogy also works if you think about how big an impact a $50 loan can have in a microfinance situation, whereas in traditional banking it’s a nuisance.