May 13, 2015

Formal and verbal description of the evolving economy

Comment on 'Why the ergodic theorem is not applicable in economics'

Blog-Reference

For the reader's convenience here again the short list of the economic propositions which may reasonably be received without proof.

Because these seven equations contain the core of all of heterodox economics a reasonable verbal description fills a textbook. So, here is the compact overview.

The first three equations describe the structure of the most elementary economic system, that is, the pure consumption economy. The equations stand for income generation, production, consumption and relate to a period of predetermined length.

The 4th equation describes the time paths of the variables of the first three equations. The three dots symbolize the discrete rates of change per period.

The 5th equation says that total profit is the sum of monetary profit and nonmonetary profit. The 6th equation says the same for saving.

The 7th equation finally describes human behavior in the most general form as target-oriented. Directed human behavior and chance determine the rates of change in the 4th equation.

All equations together define an open ended simulation of the elementary economy which, as a well-defined mathematical object, can be formally summarized by one single equation.

The shortest verbal description of the equations' objective economic content spans 16 pages and is titled Essentials of Constructive Heterodoxy: Behavior.

Egmont Kakarot-Handtke