This process eventually brought me to my own definition of price theory as analysis that reduces rich (e.g. high-dimensional heterogeneity, many individuals) and often incompletely specified models into ‘prices’
Mathematically this is optimal portfolio theory. It takes the multi-dimensional (three generally) of many trades and serializes them in order. Does this sound like a sandbox S/L pit? Sure does.
What is the basic math? A quotient ring, the idea is to always trend toward the stable point between S/L where the second derivative of the S/L ratio is maximum. In fact, it is fractional approximation, a Markov model.
Does price theory really work? No, not with central banking. The numerator is always askew and shadow banking (think sandbox) always takes over until the default contract is negotiated with the Senate. Central banks always guarantee their own renewal contract as government accumulates currency risk.
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