Friday, September 29, 2017

My information equilibrium paper


Almost two years ago, I submitted my draft pre-print Information equilibrium as an economic principle to the arXiv in the quantitative finance/economics section (q-fin.EC), pictured above. At the beginning of this year, I listed it on the Social Science Research Network (SSRN) which makes it a bit more likely to be found by browsing economists. I briefly talked about it in my book, but if you're interested and down for a bit of math (specifically, differential equations) click on the previous link to download it.

I recently re-read it (as part of my response to a review critical of the idea), and found that it holds up remarkably well given how much more I've learned about information equilibrium. If I was writing it today, I would probably put more emphasis on dynamic equilibrium and ensembles of information equilibrium relationships. I'd also present the Solow model as a particular instantiation of the "Kaldor facts" and include both the "quantity theory of labor" and the "quantity theory of labor and capital".

The introduction really does lay out both the paper and the general concept well. The economy is a complex system and maximum entropy techniques frequently provide insight — but we're left without conservation laws, well-defined constraints, or even a well-defined equilibrium in economics. Information equilibrium is then offered as a solution to this problem. I focus on reproducing well-known results (the Solow model) or empirical regularities (Okun's law), only bringing in the more controversial claims toward the end in a way that does not seem antagonistic and may even be perceived as persuasive (at least I hope).

Unfortunately, I haven't gotten past the "desk rejection" stage in getting this paper published yet. It's understandable from a journal's viewpoint — an easy way to cull the submissions is to see if any of the authors are economists or economics graduate students from recognized institutions. As I describe in my book, I came into this work from a wildly different background in physics and signal processing. However, the reason I did was because economists were attempting to effectively enter my field with their wildly different backgrounds [pdf]! And of course even economists have difficulty getting papers published for things that are far less controversial.

I also knew this would probably be the case, which is why I started my blog:
Instead of trying (and probably failing) to publish it as a paper, I was inspired by Igor Carron to just think out loud with a blog. This blog will be focused on determining if the framework established here is good for anything or just an interesting toy model. Or if it is completely wrong!
My book is part of an attempt to both offer something interesting to economists (which seems to be working), as well as bypass journal editors and go directly to the public. My paper would be the next logical step if you're intrigued by the book!

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