From: John Conover <john@email.johncon.com>
Subject: forwarded message from Jeff Brantingham
Date: 6 Nov 2001 01:09:04 -0000
Victor Sergeev will be addressing a very thorny problem in the field
of economics at SFI on November 7, 2001.
The prevailing wisdom is that things economic have equilibrium
solutions-it is the paradigm of static solutions in
macroeconomics. For example, supply-demand is often cited in the
context of equilibrium, as is the relationship between interest rates
and equity values, etc. Manipulation of the variables of static
equilibrium as a means to achieve an end is what monetary and fiscal
policy is all about.
Unfortunately, such concepts are difficult, (and controversial,) to
reconcile with entropic economics. For example, what is the
equilibrium, (i.e., mean, or average,) of a Brownian fractal? It is an
important question since, given enough time, all possible values,
(minus infinity to plus infinity,) are equally probable, and Brownian
fractals are used, pervasively, in the analysis of equity values,
(specifically, Black-Scholes,) supply-demand analysis, etc.
The resistance of the Japanese economy over the last decade, (and more
recently the US economy,) to monetary and fiscal manipulation has
renewed the debate on the efficacy of macroeconomic theory.
John
BTW, if we allow nonlinearities in the fractal dynamics, the concepts
of macroeconomic and entropic economics can be reconciled. For
example, if the "noise" is not additive, (as in a cumulative fractal,)
but multiplicative:
V = V * (1 + N(n))
n n - 1
where N(n) is the n'th value of noise, (for example, a statistically
independent random variable with a normal frequency distribution that
has an offset of the mean, avg, and a standard deviation of rms,) then
the probability of an up movement, P, would be:
avg
--- + 1
rms
P = -------
2
and the average exponential gain per unit time, G, (of a GDP, for
example,) would be:
P (1 - P)
G = ((1 + rms) ) * ((1 - rms) )
which certainly does exhibit long term, stable, and equilibrium
phenomena.
Both avg and rms can be manipulated as a means to an end through the
concepts of macroeconomic theory, (monetary and fiscal policy in the
case of the GDP, where avg is a metric of growth policy-possibly
utilized dynamically-and rms is a metric of risk.)
Unfortunately, (from the tsshannoneffective program at
http://www.johncon.com/ntropix/tsshannoneffective.html,) the duration
of time required to achieve an end may not be as immediate as
desired. For example, (using a P of 51%, avg of 0.0004, and rms of
0.02, per day-typical values for things economic,) the time required
to achieve an end through a manipulation of the variables could be as
long as 16,000 days, or about 44 years!
But, in principle, the concepts of macro and entropic economics can be
reconciled into a consistent theory.
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Message-Id: <Pine.GSO.4.10.10111051652470.29182-100000@pele>
From: Jeff Brantingham
Subject: Seminar Wednesday, November 7, 10am: "Statistical approach to the problem of economic equilibrium," Victor Sergeev
Date: Mon, 5 Nov 2001 16:57:20 -0700 (MST)
***Seminar Wednesday, November 7, 2001, 10am-12pm***
Location: Medium Conference Room
Title: Statistical Approach to the problem of economic equilibrium
Speaker: Victor Sergeev
Affiliation: Moscow State Institute for International Relations
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John Conover, john@email.johncon.com, http://www.johncon.com/