Economics and Ecometry  ^{© 2000}             

Lines in blue are "Links".
Lines in white are "quotes".
Lines beginning with a yellow (g) are news or updates.
Black lines are my text, you are allowed to copy from the text, providing the copyright is properly attributed to [© Ben Tamari ( www.ecometry.biz )].
Update 25-December-2007

g Economics

The Main Conclusions of Ben Tamari Publications Is:

The Neutrality of Money:

Money is not a neutral entity in the economic process, because it is a measure and an input at the same time. Therefore, there is an optimal quantity of money to 'employ' in a country, and the Ecometry method is the way to find out the optimum quantity. This is a generalization of Keynes Theory.

Inflation is a Symmetrical Phenomenon:

Inflation is a symmetrical phenomenon; both money and output, which are brought to the market and replace one another, have a part in its formation. Because of the relativity of the measure (money) and the entity to be measured (output), we tend to view inflation as a monetary phenomenon.

Nominal Anchor:

Nominal Anchor  is the setting of the rate of printing equal to the rate of growth (m = q), and it is consistent with economic theory and empirics as represented here. This old-new rule enhances the health of the economy, and moderates the adjustment processes and pressures of recovery of pathological economies.

Conservation and the Symmetry Laws:

The formal structure that satisfies the conditions of the conservation and the symmetry laws, is that: p = m - q, where p = Inflation (the rate of change of pricing), m = Printing (the rate of change in money), and q = Growth (the rate of change in output). This is the Pricing Law or Symmetry Law. This is the alternative and more generalized version of Samuelson's Conservation Law.  As the old saying goes "Inflation occurs when too much money is chasing too few goods".

Keynes Space:

An autonomous economic system, i.e., a country, tends to be a conservative and symmetrical system in Keynes Space  [Q_t, M_t ; t], and can therefore be represented as a complex numbers system. This presentation makes it possible to aggregate or disaggregate the system at all levels, from the individual to the most general aggregate and vice versa.

"Foundations of Economics", 1990, Hebrew.

abstract: This book proposes a new way to explain and forecast economic processes. We know that good forecasting in a  conservative system can be done (as in the energy and the weather systems, the more closed the system is, the  better the forecasting). An autonomous economic system (country) is a conservative system in Keynes Space, defined as output-money space (market).

"Dynamic Economy",  1995, Hebrew.

abstract: A conservative system in which rates are linearly related is a symmetric system. The symmetry dictates that the rate of inflation equals the rate of printing minus the growth rate. An empirical test done for 45 countries between the years 1960 - 1993 verifies the two principles. the conservative one and the symmetry one. Good economic forecasting is possible according to my theory, and the way to do it is by formulating the 'Motion Equations'  and their solutions on the basis of the conservative, symmetry and harmony principles as set out in my books.

"Conservation and Symmetry Laws and Stabilization Programs in Economics", 1997, English.

abstract:  An autonomous economic system, i.e., a country, tends to be a conservative and a symmetrical system in Keynes Space (Output, Money and time), and can therefore be represented as a complex numbers system. This presentation makes it possible to aggregate (or disaggregate) the system at all levels, from the individual to the most general aggregate (and vice versa). It also offers a simultaneous solution of the problem of allocation and distribution of useful resources in the market.

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Published by: Ecometry Ltd.

Articles (Hebrew):
1.   "Prices And Quantities In Israel Housing Market", (1981, update March 2000).
2.   "Gresham's Law", (1983).
3.   "Anatomy Of Tragedy", (1985).
4.   "Theoretical And Empirical Inflation", (1986).
5.   "Why There Is No Growth In Israel?", (1990).
6.   "Chaos And  Stocks - Review", (1993, update March 2000).
7.   "Chaos In Economics", (1994).

Surveys (Hebrew):
1.    "Patinkin And The Chicago School"(1981).
2.    "Money And Freedom" (1983).
3.    "Is Everything Is Psychology?" (1984).
4.    "Success That Is A Failure" (1987).
5.    "Security And Economic In Israel" (1985).
6.    "All that You Wanted to Say, But Don't Dare" (1984).
7.    "Keynes And Batra" (1989).

Ori Benjamin (pseudonym) with political economic flavor, (Hebrew):
1.    "We Don't Want To Go Sleeping But To Have Fun", (1981).
2.    "The Cashier Is Open And The Hand Is Writing", (1981).
3.    "Bubbles: New Innovations In Economics", (1982).
4.    "To Face The Reality", (1984).
5.    "Three Mistakes", (1989).

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Published by  "The Economic Quarterly", Israel.

g Ecometry

Introduction to Ecometry (EconomicsGeometry)

What can be done to bring about the recovery of an autonomous economic system (An economic system is autonomous if it issues its own currency.) that has gone wrong: decelerating growth, rising unemployment and prices, deficits and debts both domestic and foreign and declining exchange rates?

An economic system does not fail all at once; the process is protracted, sometimes lasting two or more generations (as in the former Soviet Union). The source of failure is generally a monetary imbalance, relative to the output, which at first produces desirable results, so that the imbalance is maintained, ultimately becoming destructive (somewhat like "pep pills").

By now, sufficient knowledge and experience have been accumulated, on both theoretical and empirical planes, to permit reforms to be introduced into such ailing economic systems. The obstacles to successful reforms are generally political. Namely, strong pressure groups, attempting to protect themselves against what they believe to be harmful effects of the recovery process, hinder implementation of the necessary measures.

One commonly proposed measure for the stabilization of an ailing economic system during planned reforms is what is known today as a "Nominal Anchor", the main component of which is exogenous fixation of the system's rate of exchange.

My thesis in this page is that the "Nominal Anchor" may be replaced by another, preferable, dynamic operating rule. This rule, the 'Symmetry Law', applied to an economic system, will steer the system asymptotically to an optimal state. As a result, the system will not have to experience unnecessary shocks after the stage of stabilization and curbing (for example: Israel 1985, Mexico 1988). However, in order for this to happen, the Symmetry Law requires more political resolve from the system than the "Nominal Anchor".

Ecoland  space (ES)

Ecoland Space (ES) is a 3 dimensions space: Output, Money and Pricing [Q, M, P,] governed by 3 equations (Tamari attractor).

Tamari attractor:

 x' =  ( x - a y ) cos (( z ) - b y sin ( z ) ,                 "x=Q" the  output.

 y' =  ( x + c y ) sin ( z ) + d y cos ( z ) ,                "y=M"  the money.

 z' =  N + E + G z +  ψ [ ( 1 - U ) y ; / ( 1 - I ) x ]    "z=P" the pricing (feedback).

 

 

 

 

 

source: Ben Tamari (1997). "Conservation and Symmetry Laws and Stabilization Programs in Economics", p. 10.

Analysis and study of the variables and invariables of each country show its position in the Ecoland Space (ES). The rule, according to which it behaves, is that, the deeper a country is located towards the center of ES (the green area), the better its position, and the more it moves towards the periphery (the red area) the worse its position.

The Eco1 software  enables the study of the economy of a country. The function of the software is the performance of simulation in the economy of states: analysis, planning, prediction and comparison of the economy of states, according to the state's data as found in the International Financial Statistics (IMF) for the years 1960-2006 (see tables). (to download Eco0)

Comparison among 20 Chosen Countries 1960 - 2006.

The test is a Roentgen like, or MRI like. We can realized that Australia, Japan, and Mexico are 'pathological economies' according to the data of 1960-2006. The parameters (a, b, c, d,) for each country were found through regressions. The population, the exchange, the unemployment and interest rates (N, E, U, I,) are multi-annual geometrical averages and the indexation parameter (G) is arbitrary. Analysis and study of the variables Output, Money and Pricing (Q, M, P,) and invariables (a, b, c, d , N, E, G, U, I) of each country show its position in the ES. We can see that Japan and Korea are the most inefficient countries in their monetary policy and Singapore is the most efficient one. Australia and Mexico are in a bad situation.

The trajectories of 20 chosen countries together, data 1960 -2006

As Tolstoy would say, 'All Health Economies resemble one another, but each Pathological Economy is unhealthy in its own way.'

Table 1: Rates of Change of Growth q, Printing m, Inflation p, Theoretical Inflation p* and Deviation D, (%) 1960 - 2006.

Source of data: Processed by the author from data of  "International Financial Statistics" YEARBOOK 2007,  IMF.

Table 2: The Coefficients a, b, c, d, J (Jacobian),  E (Ecometer), 1960 - 2006.

Source of data: Processed by the author from data of  "International Financial Statistics" YEARBOOK 2007,  IMF.

Table 3: The Coefficients: Exchange Rates E, Indexation G, Unemployment U, Interest I, Population N, 1960 - 2006.

Source of data: Processed by the author from data of  "International Financial Statistics" YEARBOOK 2007,  IMF.

Ecometer

The Ecometer is a measurement of the conservation of the economic system of a country, just like a thermometer is a measurement of the heat of the body. It is like "X Rays" which can show the real economic situation of that country.

Conservation means: the optimal relation between output and money (around 0.25 - 0.35). The Ecometer is the measurement of that relation. If the country is in a lesser than the optimal relation - the economy is heading for a depression, if it is in a greater than the optimal relation, the economy is "flooded" with money and must go through a contracting and "drying" process.

The dynamic situation of chosen countries, 1960 - 2003.

g Note 1, 25-12-2007 A Note On Interest Rates

See: Paul A. Samuelson (19-November-2007) "Balancing market freedoms", International Herald Tribune.

"It used to be enough for a central bank to "lean against the wind." That means lower interest rates when unemployment is too high and when deflation threatens. And when business growth is too brisk, central banks are supposed to raise their interest rates to dampen growth and to forestall price-level inflation that threatens to exceed 2 percent per year. Today, central bankers and U.S. Treasury cabinet officers cannot know (my underline, B.T.) whether current interest rates are too high or too low. This is surprising, but true."....

"What the world does not need now is tolerance for any persistent weakness in global Main Street growth. It is better when physicians worry too much about a patient's health than when they worry too little."

For the navigation of the optimum money growth and interest rates for different situations, both simple and complicated, I have build up the Ecometer, It is only at the beginning and perhaps it will forecast 'Hamsin in Alaska and a Snow in the Sahara' as in the first days of the weather forecasting. But I am convinced that after enough observations, that of at least 70, between the years 1960 and 2030, and an adjustment process, the analysis and forecasting will be good enough to navigate the economy of a country as well.

What the world does need now is a persistent weakness in global Main Street growth, because of pollution, shortness of resources, and unfair distribution of wealth among nations. We, as a whole, are growing too much. We must slowdown in the Main Street growth and speed up the growth in the peripheries.■

Books

Blanchard and Fischer (1989) "Lectures on Macroeconomics" MIT press.

Burley P. and Foster J. Editors. (1994) "Economics and Thermodynamics New Perspectives on Economic Analysis", Kluwer AP.

Chiang A.C. (1992) "Elements of Dynamic Optimization", McGraw-Hill.

Johansen L. (1977) "Lectures on Macroeconomic Planning" North-Holland.

Kamien M. I. and Schwartz N. L. (1981) "Dynamic Optimization: The Calculus of Variations and Optimal Control in Economics and Management" North Holland

Keynes M.J. (1936) "The General Theory of Employment interest and Money", MacMillan.

Mantegna and Stanly (2000) "An Introduction To Econophysics: Correlations and Complexity in Finance.", Cambridge.

Medio A. with Gallo G. (1992) "Chaotic Dynamics: Theory and Applications to Economics", Cambridge UP.

Patinkin D. (1969) "Money, Interest, and Prices", 2ed. Harper & Row.

Peters E. E. (1991) "Chaos And Order In The Capital Markets", John Wiley & sons, Inc.

Puu T. (1991) "Nonlinear Economic Dynamics", 2ed., Springer-Verlag.

Puu T. (2003) "Attractors, Bifurcations, & Chaos; Nonlinear Phenomena in Economics", 2ed., Springer.

Puu T. and Sushko I., Editors. (2006) "Business Cycle Dynamics", Springer.

Sargent T.J. (1987) "Dynamic Macroeconomic Theory", Harvard UP.

Sato and Ramachandran (1990) "Conservation Laws and Symmetry: Applications to Economics and Finance", Kluwer AP.

Stokey and Lucas with Prescott (1989) "Recursive Methods in Economic Dynamics", Harvard UP.

Takayama A. (1985) "Mathematical Economics" 2ed. Cambridge.

Links

http://cepa.newschool.edu/het/schools/business.htm

http://www.kwaves.com/kond_overview.htm (Kondratieff Theory)

http://ideas.repec.org/p/wpa/wuwpfi/9411001.html