Uncertainty constant and the economic theory of quantum adjustments

In this post I want to talk about the process of a single economic transaction under the restriction that the agents have a fixed variance in their ability to measure value. This is equivalent to physicists talking about particle interactions with a restriction of planks constant. let me preface this discussion with profound thanks to all the folks who created and populated Wikipedia.

Under this theory I postulate that agents are comfortable estimating elasticity to within a fixed uncertainty. Then I postulate that any given transaction is a non zero time length process. I show that that the resultant transaction process is equivalent to an optimum fit orthogonal decomposition of the transaction value into subdivisions of value equivalent to multiple of the fixed measurement uncertainty. This then is the link between linear estimation theory of economics, Minsky restructuring, and the time independent model of macro economy. It unifies micro and macro. It provide a model of asymmetry.

As usual, I use lazy mathematics and hand waving, leaving the pros to sort the details, match the data, and win the Nobel.

Let us start with the process of a house purchase whose total transaction time is around a few weeks. The buyer and seller do not know the final outcome of the transaction until the few weeks needing to negotiate final details. I will discuss the process from the buyer's side. From the start the reader will understand about where I am going, and the reader will have some sudden insights into quantum mechanics.

The buyers first task in a home purchase is to estimate the typical price he will have to pay. He will estimate that price to the level of constant accuracy, no better and no worse. As soon as his survey of the market is complete, he makes adjustments, or planned adjustments to his balance sheet, perhaps pre-qualifying for a 30 year loan.

n the second step the buyers narrows down his choice to houses within that first estimate. He examines the typical commute, he does a walk through. Based on his further refinement he finds further adjustments to his balance sheet, as soon as he can estimate further refinements within his accuracy level. Some houses need work, some houses come with a refrigerator. He setermines this further refinement of price. Note the separation between his first and second estimate will be nearly equal to the accuracy estimate. In all steps, he is performing an orthogonal estimate of the residual of the prior estimate to within his constant accuracy.

He finishes his steps by a negotiation with the agent about transaction costs, fees, and move in times. In the finaly deal, he has a remaining residual nearly equal to his uncertainty constant.

Now, at equilibrium, value differences must be synchronous across all transaction, each agent suffers the same constant accuracy restriction. I will get into that later, as soon as I get an idea of the why and how. But the outcome is that the finite set of eigenfunctions will be separated by multiple of the uncertain constant. The aggregate system will be synchronous at equilibrium, and the monetary yield curve carved up into the same eigenfunctions.