Tuesday, July 27, 2010

Bounded Rationality

Krugman wants us to figure it out.  I suspect that Bounded Rationality can be modeled by assuming each agent suffers a constant uncertainty, he/she accept decisions within the uncertainty range, neither more certain nor less certain.  If that is the case, then economic production, modeled in macro, is a Shannon Channel with Gaussian noise equal to the uncertainty constant.  Or course, everything that leads from that should be called Quantum Economics, because the set of equilibrium points is finite.  Thus is explained the inflated and deflated states of the economy, the encoding process for production, and the sudden non-linear change from one stable state to another, as well as Ramsey searches for the equilibrium conditions of any production network.  Then we must include entropy norms into production systems, because equalizing a Shannon Channel is like compression of information, an entropy process.

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