We know institutions, firms and household fit their constraints by recursive queue ordering of the top two and three priorities. That solution is, I think, differential hyperbolic, localized wave motion. But Cubic and quadratic spline interpolation should work pretty well. Wiki has the summary as does Wolfram. If the economist knows the constraint and can identity principal component, then continuing spline interpolation should work as long as the constraints hold. And it looks like the constraints have been holding for some thirty years.
So take risk and gain over the cycle, for the principal sectors. They will match their decisions against the constraint in either two or three order polynomials. The solutions should be optimization of the two and three first priorities in their queue. There should only be about 3 principal components that determine the broad outlines of the economy.
The economy and physics is not a true ergodic system over time, the kinetic energy or variance in the system is shaped by the agents, and not an input.
No comments:
Post a Comment