Monday, September 12, 2011

Aggregate Economics

Prescott who got a Nobel for the real business cycle.

Prescott is figuring out that a bit of imprecision is the key to optimal flow, he will be a channel theorist soon. The Kling sustainability comes in when the firm or household finds the proper cargo size, and delivery rate that can operate with coherence on shared networks. So, the concept of a bit of imprecision, selecting the proper cargo size and rate; and we have converted RBC into a problem of efficiently encoding a learned channel.

The paradox again.
OK, the greater variety of goods I can spread around over finite network, the more disorder the network has. Think this way, the greater variety of deliveries, the more accurately I can describe the economic world. You have more bits, greater precision, thus able to describe even small surprises, maximized entropy.

The bit of imprecision allows us to use inventory as buffers, so the flow inside the firm can be made very regular. So the entire theory starts when one minimizes total inventory or transactions; when we have directed flow.

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