Tuesday, November 22, 2016


Economists are not sure what it is.

It is a ratio, a price R and a relationship between R,R' and R''.

Skip what kind if relationship, and ask what the conditions are that let us do price calculus on probability distributions.  The ratio is a ratio of two means of some distribution, so we have right away imposed a constraint on allowable distributions. The distribution of R has to be contracting a bit else the distribution spreads, and the time/spectrum theory says the bandwidth in increasing, and you have an unbounded system, not Ito compatible.

But there is the known distributions, weiner processes or Brownian motion for example, these are area filling.  It works because there are bounded curves through which variance and mean ratios are about the same, a universal measure.  So, without further ado, when the economy overheats, prices spread as necessary to keep he enclosing curves equally smooth.

The constraint on the ability to do adapt, in continuous terms, is the imposed constraint on R,R', and R''. If the constraints are not met, the system cannot maintain Ito, and the system loses conservation of bit error, goods suddenly disappear, poof, in front of our eyes. That is mostly an impossibility, until we start breaking Say's Law.

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