Thursday, June 22, 2017

How do we estimate NGDP?

We are really good at measuring the implicit price deflator.  Another moment of the deja vu, the Hamilton two peak theory.

Example, you think a home appliance was a good deal this month.  Some time later you see another large price change in the same appliance. We linearize our two best looks, the recent peak deviations are remembered. Shannon-Nyquist applies, seeing something twice almost locks in a net present value.

The concept of optimum compression is to requantize when you see it 1 1/2 times.  That is why we compress the queues, queue size is advanced warning. the economy is optimum we we see fewer deja vus, they are actually inefficient and cause price locks.

They accumulage, they are like tiny quants of overflow or underflow.

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