Fat Accounts And The Laws of FiscalDynamics

      57 Comments on Fat Accounts And The Laws of FiscalDynamics

It still amazes me … Gary Taubes wrote an entire chapter in Good Calories, Bad Calories titled Energy Conservation, which explains how the laws of thermodynamics apply (because they do) to his hypothesis that elevated insulin makes us fatter. In Why We Get Fat And What to Do About It, he explained the concepts again in two short chapters titled Thermodynamics for Dummies. It’s all right there. And yet a reviewer of Why We Get Fat offered up this criticism:

There is no question that the science of nutrition needs critical review, but Taubes is just wrong. Calories-in-calories-out is the law of thermodynamics.

Anxious to share similar insights, a reader once left me this encouraging comment:

You should take your own medicine and stop posting until relatively basic concepts like thermodynamics cease to elude you.

I do, in fact, understand the “relatively basic concepts” the reader insists are eluding me. He was referring to the First Law of Thermodynamics, which Wikipedia summarizes as:

The law expresses that energy can be transformed, i.e. changed from one form to another, but cannot be created nor destroyed.

Since energy cannot be created or destroyed and we store energy as fat, the “it’s all about counting calories” crowd believes the amount of weight we gain or lose is a function of calories-in vs. calories-out. Guess what? They’re correct. I’ve never disputed that, and neither has Gary Taubes. What Taubes does dispute is that “calories-in vs. calories-out” means gaining and losing weight works like a simple bank account.

With a bank account, deposits and withdrawals are independent variables … that is, they both affect the account balance, but have no effect on each other. If I deposit $100, my account grows by $100, period. If I withdraw $25, my account shrinks by $25, period. Depositing $200 and then withdrawing $100 has exactly the same effect on my balance as depositing $100.

It’s because of the bank-account mentality that the calorie-counting crowd offers up useless advice such as, “If you just cut 100 calories per day from your diet, you’ll lose 10 pounds per year!”

What Taubes has tried to explain is that the bank-account analogy doesn’t work because in human biology, calories-in and calories-out are dependent variables — that is, when we change one of them, our bodies make compensating adjustments that affect the other. He’s also tried to explain that hormones — chronically elevated insulin in particular — can cause our bodies to store more calories as fat, which in turns affects our appetites (calories in), metabolisms (calories out) and activity levels (calories out).

Nothing he wrote in either book disputes or ignores the laws of thermodynamics. To illustrate, let’s expand on the simple bank-account idea and create a fictional banking scenario where things are a little more complex.

My arrangement with the fictional bank works like this:

1. I’m expected to make daily deposits.
2. The bank pays all my bills electronically, including a large, daily heating bill.
3. If my account runs low, the bank will call and ask me to make bigger deposits for awhile, and I’m expected to comply.

I like this arrangement. I deposit some cash and checks every day but don’t track the exact amounts, because the bank is handling my bills and I don’t like paperwork. I’m dimly aware that my average balance is somewhere around $2,000 and that’s fine by me.

In the real world, of course, we love big bank accounts. So to make our fictional banking world serve as an analogy for weight loss, let’s suppose FDR is serving his 20th term as president and just passed a new stimulus bill declaring that anyone who maintains a bank account of more than $2000 for six consecutive months is hoarding “undistributed profits,” and will face federal prosecution. So I actually open my next bank statement instead of shredding it, and — yikes! — my balance is $2234.

Unsure how to deal with this problem, I visit a financial consultant who explains that there’s a fundamental, unbreakable, empirically proven law of banking known as The First Law of FiscalDynamics. Here it is:

Money can be transformed, but cannot be created or destroyed.

(Of course, the Federal Reserve creates new money out of thin air all the time, but just go with me on this.)

The consultant explains that when The First Law of FiscalDynamics is applied to a savings account, it works like this:

The balance of a savings account is always determined by the dollars in minus the dollars out.

Therefore, if my account is growing, the root of the problem is that I’m making too many large deposits. The consultant estimates that the bills the bank is paying on my behalf add up to $200 per day. So if I just rigorously count my deposits and limit them to $180 per day, my account will drop below $2000 within one month. If I want to shrink the account even faster, he explains, I can sign up for aerobics classes and the bank will pay for them out of my account.

I follow his advice, but when I open my statement a month later, I discover that my balance is $2158. Frustrated, I reduce my deposits to $170 per day, but a month later my balance has shrunk to just $2122.

Worse, a bank manager named Marta keeps calling to say I don’t have enough liquid funds to pay my bills, and I’d better start making larger deposits again. Mystified, but unable to resist Marta’s request, I increase my deposits to $175, only to discover a month later that my account has grown to $2285. Something is clearly wrong here. I’m following the expert’s advice, but it’s failing.

So I do something nobody outside the banking industry has ever done before: I dig out the DISCLOSURE OF TERMS document I was required to sign when I opened my account, and I actually read it. I also read books on banking practices. I interview people who work at the bank.

After completing my research, I write a document titled Good Dollars, Bad Dollars in which I propose an alternative explanation for what’s causing my savings account to become bloated and why the financial consultant’s advice failed. It’s complicated, but here is the basic scenario:

The bank, as it turns out, is not a passive organization that simply takes deposits and then pays my bills. In fact, the bank is quite interested in having me maintain my savings account at the level it prefers. This is largely because the bank manager, Marta Bolism, has been around long enough to remember some serious bank failures and is therefore obsessed with cash flow. However, she’s also aware of the undistributed-profits law and knows my account shouldn’t grow too large.

For most of her long career, Marta has handled my account quite well. If my balance dips, Marta worries that I may eventually run short of funds to pay the daily heating bill …  and as I discovered on page 87 of the DISCLOSURE OF TERMS document, she not only pays the bill, she can adjust my thermostat from her office. So if I forget to make a few deposits, she responds by turning down the thermostat to reduce my bill. She also calls and reminds me to make bigger deposits, and since I’m unable to resist her, I comply.

On the other hand, if I make occasional big deposits, she turns up the heat for a couple of days to generate a bigger bill. She also has the discretion (as I discovered on page 119 of the DISCLOSURE OF TERMS document) to divert a portion of my deposits into the bank’s Building And Repair Fund as a service fee. So when I make big deposits, Marta decides the bank should replace a few loose bricks and makes a contribution to the Building And Repair Fund on my behalf, thus keeping my account below $2000.

In other words, Marta exerts rather a lot of control over my account. My deposits and withdrawals don’t affect my balance independently, because Marta adjusts my withdrawals based on my deposits, and alters her requests for deposits based on my withdrawals. She does all this to keep my account high enough to pay the bills, but not so high that I risk the wrath of the feds.

Unfortunately, Marta’s previously-effective methods for maintaining my balance have been slowly undermined by changes in the deposits I’ve been making. I used to make most of my deposits in cash. Since cash is available as soon as it’s deposited, Marta was never concerned about my ability to pay my bills, even though my average deposits weren’t very large and my average balance was below $2000.

But nowadays, most of my deposits are out-of-state checks. At first glance, this doesn’t appear to be a problem — after all, a dollar is a dollar, as the financial expert informed me. But as it turns out, my deposits are processed by an elderly account manager named Ian Sulin, and being somewhat old-school, he treats cash and checks differently. When I deposit what Ian considers too many checks, he become suspicious and puts on a hold on a big portion of the funds.

The result is a small but consistent trend towards excess savings accumulation. After I deposit several checks, my account balance may be $2205, but Ian tells Marta the available balance is only $1100. So Marta grows worried and turns down my thermostat to conserve funds. Then she calls and tells me I’m low on available funds and should make larger daily deposits.

So I do … and then I’m surprised and frustrated when my next statement shows my account balance is at $2260. I decide to ignore Marta and reduce my deposits to $170. Unfortunately, those deposits are almost entirely in the form of checks, and Ian puts a hold on most of the funds. Marta panics at my low available balance and turns my heat down even more. She cancels my aerobics classes to avoid paying for them. She decides the bank can live with the cracked bricks and stops diverting any of my deposits to the Building And Repair Fund.

I finally lose my will to ignore her increasingly desperate calls for larger deposits and raise them to $185 per day, figuring that’s still below my daily expenses. Unfortunately, Marta has reduced my bills more than enough to make up the difference, and when I open my next statement, I see a balance of $2287.

After figuring out how this all works, I realize the only way to prevent Ian and Marta from pushing my account slowly higher is to switch back to making most of my deposits in cash. So I do. The funds in my account are readily available, so Marta stops calling and asking for bigger deposits. She turns up my thermostat. She withdraws funds to re-enroll me in exercise classes and diverts some of my deposits to the Building And Repair Fund. A few months later, I find that I’m happily making deposits whenever Marta asks for them, but my average daily balance is right around $1900.

Now … suppose I present this explanation to the financial expert who told me to simply make smaller deposits. He could disagree with the explanation. He could claim Marta Bolism doesn’t manage accounts in the manner I’ve described. He could deny that Ian Sulin puts a hold on checks. He could insist that people who end up with bloated savings accounts just don’t have the discipline to count and limit their deposits, and remind me that when people are put in prison for 10 years, they end up with no savings whatsoever.

That’s not the point. The point is that nothing in my hypothesis requires money to be magically created or destroyed. Nothing in my hypothesis disputes that the size of my savings account is determined by the dollars in minus the dollars out. So no matter what other criticisms the financial consultant may raise, he can’t simply dismiss my hypothesis by claiming it violates the First Law of FiscalDynamics.

Well … he could claim that, of course. He could roll his eyes, shake his head, and say, “Dollars-in-dollars-out is the Law of FiscalDynamics. You should stop commenting on financial matters until relatively basic concepts like FiscalDynamics cease to elude you.”

But if he did, I’d seriously doubt his intelligence.


57 thoughts on “Fat Accounts And The Laws of FiscalDynamics

  1. Galina L.

    Your article is brilliant in more then one level. Besides being humorous , it was also brilliant to give your Martha and Ian distinct personalities. Somebody’s manager could be less obsessive about keeping the bank account growing, or clerk in Ian’s place could be able to loose his prejudgment towards state checks during last 10 000 years. Looks like it is a good argument for nutrition type profiling.

  2. Robert J. Stone

    Great Analogy Tom-you are bright and talented and doing people a huge service, please continue!

    You posted earlier about “listening to your body, do what works for you”. So true.

    We have a tendency to adopt a line of reasoning and then try to “fit it” to our lives any way we can. I know I did when I tried the “low fat diet”, only to gain weight around my middle despite the fact that I was eating hardly any fat.

    Hunger drives food intake, and if the carb intake is high, hunger tends to be high. Reduce carbs, reduce hunger. Very simple.

    As for the skeptics that say a low carb diet is a “low calorie diet in disguise”, the skeptics are the ones fooling themselves! There is no disguise….you’re not hungry because your body “sees” the energy available to is the form of fat stores, and like an obedient servant, it uses these fat stores in lieu of sending a hunger signal that tells you to eat more Little Debbie Cakes.

    Compared to years ago, I now eat about 1/2 the calories, yet experience far less hunger. Do I think we should live on bacon, ground beef and prime rib? No. Add lots of vegetables and some fruit, and you’ll lose the fat your body doesn’t need. Will you be on the cover of Shape or Men’s Fitness? Perhaps not…

    But do you really want to put on your accountant’s vest and glasses, and count calories for the rest of your life? I love numbers, but counting calories is for the birds…you don’t need to count calories when you’re eating the way Nature intended.

    Remember: “It’s not nice to fool Mother Nature.”

    Ironic that that line is from an old margarine commercial…”If you think it’s butter, and it’s not…it’s Chiffon.”

    Keep up the great work Tom, and I vow to see “Fat Head” soon…

    Robert J. Stone

    Thank you, Robert. That’s exactly the point that seems so difficult to get across to the “it’s all about the calories” crowd. Eat the foods that keep the calories you consume available, and yes, you’ll probably eat less. That’s the whole idea.

  3. Nick S

    Okay… gotta nitpick.

    You’re agreeing with the assertion that weight loss requires ingesting fewer calories than one consumes; balanced hormones will drive that behavior, leading to weight loss.

    That doesn’t quite fit with my experience, or my understanding of the science. Is it not true that chronic overfeeding fails to make some people fat, regardless of their hormonal balance? Why is it that I can eat 3000 calories per day on a low-carbohydrate diet and lose 2-3 lbs per week, or gain similar amounts eating 1800 calories per day on a low-fat diet?

    I guess my question is… why this message that it’s all about controlling behavior? I agree that there is a significant role for behavior in all this, but the science seems to support the theory that low quantities of certain macronutrients prevent weight gain, regardless of caloric intake.

    There’s no contradiction there. The key point is that energy expenditure can change quite a bit. If you over-feed some people, their bodies expend more energy, keeping calories in and calories out in balance. I found through a little self-experimentation that I can consume quite a lot of food if it’s zero-carb and not gain weight, which means my body is increasing energy expenditure. If you gain weight on fewer high-carb calories, it means your body is responding to the carbs by locking up fatty acids, so your body expends less energy to protect itself against a fuel shortage.

  4. Catherine

    Richard Feynman is a personal hero of mine on so many levels, and the concept of equilibrium is one I always try to keep in mind. I’m delighted to hear he wrote something relevant to this topic!

    Here is one of his quotes that also applies directly to the close-minded re: paleo/primal/GCBC, etc.:

    It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with experiment, it’s wrong.
    Richard Feynman


  5. Dana

    “Calories in” not only means the food you put directly into your mouth, but also the fatty acids your adipose tissue is supposed to release between meals to keep your body’s energy needs met. (It’s the inability to release those fatty acids due to high insulin that makes fat people so ravenously hungry.) Fatty acids, by definition, are food–but these fatty acids do not fuel your metabolism by way of your mouth; rather, they are already in your body and going into your bloodstream. Remember, you are nothing but a great big specialized clump of cells. It’s your cells that ultimately are eating, not you. (Well, assuming the whole soul-body split, a philosophical notion to which I do not subscribe–but a lot of people do subscribe to it, so there you go.)

    “Calories out” not only means the food you burn for fuel but also the food you turn into physical structures. So if you’re going to use a gasoline engine analogy for human metabolism as so many of the calorie freaks like to do, keep in mind that food is not only fuel for our engines, it is also the spare parts for them. When was the last time you were able to change the air filter in your engine by way of the gas pump? Never, I’ll bet. And this, boys and girls, is yet another reason machine analogies should not be used to explain biological processes in an organism.

    BMR doesn’t even do anything to explain the spare parts. BMR only tallies what the engine’s burning when it’s idling. I suppose there’s some fancy-schmancy term that covers tissue maintenance vis-à-vis caloric intake, but I have yet to see it used in popular literature.

    Anyone who says low-carbing works because people are ingesting fewer calories on it has got to seriously get a clue about this. Because a low-carber in ketosis eating 1500 calories a day from appetite loss and losing a pound a week is not losing that pound a week because they are eating 1500 calories a day. Technically, they’re eating 2000 calories a day. The extra 500 calories a day is that one pound of fat being mobilized–and what’s that mean, anyway? It means the fatty acids are going into the cells to be burned. Duh.

    I keep trying to explain this to calorie freaks and for some reason, it never takes. Clearly, I suck at writing. Or they suck at listening. Or science. Heck, it might be all of those things at once. *shrug*

    They suck at understanding. Honestly, I think the concepts are just over some people’s heads.

  6. Ashley

    This is one of the BEST analogies I have ever seen written. I love using analogies and I also love food and numbers so this really made sense to me in a simple way. I have been debating with my husband for sometime that it is MORE than just calories in and calories out but perhaps this will give me a better way to explain my stance on the issue. Thanks Tom!

    Thank you. I’m a big fan of analogies myself.


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