Tuesday, November 30, 2010

When Hayek buys an extra coat

Brad mentions this story about the economist Hayek:

There was silence in the seminar room. Richard Kahn broke it. "Do you mean to say," he asked, "that if I were to go out tomorrow and buy a new overcoat, that it would increase unemployment?"
"Yes," said the man in the front of the room, Friedrich von Hayek, "but it would take a long and complicated mathematical argument to explain why."
And naturally Hayek defenders accused Brad of revisionism. But, I wonder if there is a math and what it says.
Here is my comment at the time:
The disturbance wold be local in the corridor hypothesis. No change at the retail level; but some other customer, seeing a slightly longer line will keep her old coat another year. Retail inventory stays within acceptable uncertainty so no change in wholesale delivery. Yes, Shannon channel theory gives exactly that math, and it isn't complicated.
Tis is the QM response. Just like Neils Borh and the trace of correlation, I present a theory that the two customers, though never having met, coordinated their actions, the one buying two coats and the other skipping this years coat. How did they Secretly coordinate? Through the queue at the checkout lines, two independent agents exchange information via the relative wait for a sales clerk.

Economic agents and sectors never completely decorrelate activities, and queuing adjustments can happen about local production without reaching the threshold of global supply, even fractionally.

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