The Use and Abuse of Isaac Newton

Bitcoin’s recent rise has prompted an ever growing number of people to misstate and otherwise abuse Newton’s laws of motions. Predictions of a Bitcoin crash typically invoke “Newton’s Law of Universal Gravity [which] states that what goes up must come down” or some version of that “law”. The whole Newton’s law of “what goes up must come down” is a trope in reporting on any price surge, e.g., individual stocks, gold prices, S&P500, etc. Should we be concerned that Newton’s laws of motion don’t, in fact, say “what goes up must come down?”

Bitcoin is just the latest in posts and articles appealing to Newton’s laws. Seems every author wants to “understand” some complex economic, political, or social situation by applying Newton’s laws.

Newton’s third law is a favorite spot of abuse. Andrew Mitrovica writing about political resistance says:

In the cacophonous age of Donald Trump , Americans would do well to recall Isaac Newton’s Third Law: For every action, there is an equal and opposite reaction.
Americans would be wise not only to remember this axiom of physics and, indeed, politics, but they must be prepared to exercise it finally and emphatically, en masse, in defiance of a dystopian regime’s toxic actions at home and abroad.

Really? Newton’s third law is an “axiom of … politics?”

This use and abuse of Newton is not new, e.g., see “Newton’s Third Law states that every action produces an equal and opposite reaction. He was talking about physics. But it’s equally applicable to less scientific stuff as well” from 2009. Stanley Bing then goes on to use Newton’s third law to describe (predict?) human behavior. While Bing got the law right, he like so many others misapplied. Newton’s laws describe the motions of macroscopic objects moving at relatively slow speeds, not the behavior of humans (or stock markets or currency exchanges or …).

Newton’s first law doesn’t escape flogging. Apparently Tom Lee of Fundstrat Global Advisors thinks Newton’s first law applies to stock prices (the original post is behind a paywall, so I rely on quotations from it):

Newton’s ‘law of motion’ applies to stocks in mid-September — 90% of time, if stocks up between 5% to 20%year-to-date (YTD), gains continue to year-end (YE).

Newton’s first law does not apply to stock prices (or gold prices or Bitcoin prices or the price of kale at your local organic grocery store).

Just to be clear: Newton’s laws of motion do not apply to any market. They apply to physical systems of everyday objects moving in everyday ways.

Will you please stop abusing Isaac Newton?