Tuesday, October 9, 2012

When Economists Drink Tea - II

To address this question requires the systematization of work that has already been done, and I will refer to this process by a specific term – mega-economics.

Megaëconomics consists of the following procedure:

First nominalization:
1. Using systematic means create a proxy between output and price. This is an exercise in econometrics: measure out put and the relative abstract exchange values with distortions from market failure and inefficiencies.
2. Overtime find a trendline for a market basket of these proxies. This trendline will be represented  by a continuously differentiable function.  This is largely a statistical question and takes no more than the ability to use a spreadsheet.
3. Map the marginal deviation around this trendline. This can often be accomplished by imposing a macroëconomic model with guass distribution around the trendline. While out of fashion because of misuse during the financial meltdown

Second reification:
4. Correlate this nominal model to events which alter the utility preference, or indifference. That is a mesoëconomic model.
5. Verify that inflections in the nominal model (mega- ) model are larger than can be explained by the cyclical (macro-) model and thus represent a potential alteration in the structural (meso-) system.

Third monetization:
6. Show there is an alteration in not merely output, but price relationship which confirms that the imputed mesoëconomic preference change is reflected in micro- preferences in an local manifold of Sayesian equilibirum. That is that supply and demand are local self-correcting to new market clearing levels in response to shocks resulting in full utilization of capacity with an understood level of marginal attachment to the labor force and capital capacity. This should circle back and connect to the original output and price model.

The objective here is to correlate relative value to absolute value through means of price system.

While some of these terms are more concise than current practice, this is a fairly close summary of the bits and pieces of how historical economics is done and how it used. It is also a good corrective for failures in exigesis work.

Now for what is original – as opposed to merely systematic synthesis – to this post.

Since the baseline constructed in (2) is an attractor, it represents a zero in the generating iterative function. The marginal marco-models represent the boundary with other attractors, and the degree of the marginal functions is one less that the minimum degree of the iterative function. This can be determined by the number of convex attractors, but since we do not know the other potential output states, it is impossible to do this with certainty.

From this iterator we can then determine the number of terms that must be included as the equilibrium state of the individual actor. Or, how many things the ordinary economic unit, firm, government, or person, is concerned with.

Often the reification step is sufficient, however, since this correlation is often only the interaction, we must sum it as a <> wave function rather than as a classical function with determinant value.

This method will be used to analyze the twin data series and reach a different conclusion about the relationship to industrial capitalism to the public sector.