What is the one thing about this chart that each and every economist should understand? Ten years ago a billion eople could not look at this.
Leave that aside, let's talk my theory. What is this? Three periods, the left, rank N, the middle, rank N+1, the right rank N. Since the firm or household accepts approximate market accounting, they maintain round off error in inventory. and accept lower precision market accounting (they buy in bulk, 12 eggs to a carton) . Inventory is finite, so we alter market precision to burn off inventory (Cut the egg carton in half) . We change state all at once because we maintain maximum entropy encoding of shipments, we do things with the minimum number of transactions.
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