Saturday, January 9, 2010

If you want to model Fiscal Policy then

you have to model Congress. My thesis is that the average citizen treats Congress as an expensive bit of noise in life. The average Citizen is much more aware of the executive branch, especially the IRS, social insurance and defense. Congress is more of an incomplete market of cartels.

So the match between Congress and the Citizen is to give the Citizen doses of the big three, in quantities and rates that minimize citizen complaints and have simple production networks. Then the Congressional cartels bargain for a share of the quantization biases. The Citizens and Congress often distort the Executive channel and leave large counter bets for insiders.

Here is how researchers can test. Use the hydraulic model to estimate a best fit optimal wage distribution. Construct H(p) where p are the wage rates. Try and determine if Executive mandates have increased or decreased the information, [actual E(p) from transfer payments] - H(p). Have Congressional actions decreased wage deviation from H(p).

Wages studies using the technique are easy with published wage classifications. QM Theorists would be looking for state changes, places where wages are "recoded", to balance an accumulated reduction in channel entropy. Go back a few posts to look at CEO wages studies using this method. Do the same for the medical profession, before and after the Leap. Compare the wage intropy of the average citizen before and after the Leap.

While posting, another issue, the relationship between the entropy of physics and economics. The Shannon channel is entropy maximizing but is always has finite bandwidth. So when producers code for the consumer, in terms of establishing a production chain, the producer is participating in the constantly expanding entropy of the universe. We alter the rate of entropy increase in a region by increasing it in another region (for ourselves) over finite time intervals.

So efficiency in the economic-physical world means that we allocate more of natures low entropy for ourselves, knowing that the total entropy increase is unchanged.

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