Markets and Collective Delusions

I was reading an interesting book, and had an idea. The book was "The Idea of the State," and it was discussing the conception of the state as a product of collective consciousness. The argument was that a country is not defined by it's borders, citizens, or culture - any of these can and will change. It's defined partially by the fact that we consider it a state and act on that belief. That second part got me thinking about my senior project, which I want to do about the application (and specifically mis-application) of mathematics. We take an example which works to illustrate the point I wish to make, then see how it applies in a more abstract field.

When mathematics was first applied to finance in more than a superficial way, it was important that the system in place, including things such as interest, would work mathematically. It is not difficult to build a consistent mathematical structure on that basis, and one was built. The question is if the ideas are intrinsic to the idea of time as it relates to money, or if they are imposed because the math says so. If I tell someone that I'll give them a dollar today instead of a dollar and fifteen cents in a year, and the interest rate is ten percent, it is logical for a person, all else equal, to wait to receive the money later, in exchange for the extra return. This is a basic result of the equations governing interest.

Now we get to a more complex example - let's discuss market pricing. Everyone uses related models and similar assumptions to price a stock. The system, within the limits of its ability, is correct. It is consistent to large extent, and the market works. The question is whether the market reflects the prices because the nature of the market essentially is reflected in the models, or if the collective agreement of the market to use these and similar assumptions makes the models work. When Mayo, in "Investments - An Introduction" discusses pricing, he assumes that there is an intrinsic connection, one which may simply be widespread agreement.

Anyways, pondering markets and pricing and people.