Wednesday, February 12, 2014

The Bell and adaptions of probability distributions

Economic folks want to do the Solow, great fun. I do it in spectral space by looking at probability distributions changes. I know that the bell gets the optimum Euler adjustment, so I am in Euler space. How does on Bell warp into another Bell in response to a shock.

Consider the distributions of students by grade ranking.  If it moves from a positive technology shock that reduces college costs, what happens? Well, the shock puts a Bell on the low end, a positive supply boost to the student,  but stable production of college graduates. A Bell on the left. The Bell ends up with lower prices, but in its intermediate states pays a slight adjustment cost, inflationary. The final Bell is wider, not narrower. The system has gained in bandwidth, the dead cat bounces are more mild.

In my mind, I am relating know variations in a time series from a probability series, sort of known translations from probability to time.  Wider distributions have less volatility in time, this is a greater bandwidth effect. Then Euler is Bell. Upward sloping to the right is positive semi stable in time.  Entries to the left, exits to the right, when the right is downward sloping.

No comments: