Wednesday, January 18, 2012

OK, back to economic theory

Back when I simply said, OK, lets create the quantum model, based simply on the fact of the large crash, Oct 2008. In looking at the equations, I knew I had a yield curve, and from my background cast about looking for a model that dealt with the Corridor Hypothesis. My background caused a pattern match with Burg of Stanford.

Burg, I summarized as performing the smooth Fourier transform, then entropy encoding that result with something like a Huffman encoder. That led me back to Shannon and Kelly an Benford's law and channel theory.

But it is still Burg, but in a different order. The economy does the Huffamn encoding first, in order to get quants that generate a smooth Fourier math about a Lagrange point, essentially. We edjust the economy as if to make money work, and money needs a zero (the additive identity). The economy creates a model that gets us a Zero for a while, but eventually we start to meander over to the Zero point and the quants no longer are stable, we need a Recalc.

Nature has no Zero, it is artificial! But Zero makes transaction simple, low cost;, it enables money. The trade off, use the broken model, but eventually it needs calibration.

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