Economic Stability

Economics has been making sense for me after seeming to be impenetrable for several decades. So for about two years, the pieces of the economic puzzle have been falling together, one by one.

At this point I've become confident enough to announce a solution to the problem of economic stability. Even though I've had a mathematical framework at the back of my mind, the underlying model and logic are presently available only in words. Maybe I'll throw in a few diagrams or equations if it isn't too much work.

I expect this exposition to appear in bits and pieces, since the argument requires a fair amount of background and build-up before the conclusion seems obvious.

For starters, rather than be too precise, I'm going to go for just laying the argument down. I'll come back, pick up the pieces and reorganize later.

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The problem under scrutiny here is the problem of optimal management of the real economy. Taking the productive capacity of infrastructure, housing, people, businesses, utilities, government and so on as given, I am referring to the flow of goods and services.

We all know now that the real economy can freeze up, partially or even totally, and begin to produce goods and services at a rate far below that which the productive capacity can attain.

By the problem of stability, I mean the issue/problem/challenge of keeping the rate of flow of goods and services at a level sufficient to care for the requirements of the people in the society, the physical infrastructure itself, and the society as a whole. I will extend and refine this oversimplification later.

Bringing this close to home, we all want to live in good economic times and to avoid having to live in an economic recession, or even worse in a depression.

I use a four-level model as a framework for the exposition:

1. Context
2. Paradigm
3. Control layer (BAFLM)
4. Real economy (RE).

We postpone the discussion of Context and Paradigm for later, briefly remarking that these are the levels within which everything in the control layer is generated.

The Control layer is perhaps better characterized as the Banking/Accounting/Financial/Legal/Monetary layer. That's BAFLM for short.

Coupled together, the BAFLM layer and the Real Economy form a feedback and control system, with the RE playing the role of the controlled component and the BAFLM layer playing the role of the control system.

The value of conducting economic discussions in terms of feedback and control systems is that emotion and politics are minimized at the same time that clarity and tractability are promoted.

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If we examine the economic system currently in play in the US, we might look to see whether or not it exhibits something like a design. . . .

OOPS! I'm out of time. More Later

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