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Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works

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  • Albers, Scott

Abstract

“Okun’s Law” states a 3:1 proportion between percent growth in U. S. real GNP and percent decrease in the rate of unemployment. This paper argues that this ratio is actually a Pi:1 proportion, heretofore unrecognized because it is displayed through a form of mathematic / harmonic inverse. In Part One the Cartesian coordinate system is merged with the legal doctrines of actus reus (x-axis, actions) and mens rea (y-axis, thoughts). A unit circle of personal choice – including economic choice (trading vs. keeping) – may thereby be devised. This unit circle is then aggregated into a torus, half the circumference of which represents U.S. real GNP (Pi), the antipodal half-circumference its monetary value (Pi) and the radius the rate of employment necessary to its production (R = 1). Mainstream econometric analysis appears to support this theory of inverses with proximities of within 1.3%, 1.0%, 0.35%, 0.00105% and less than half a degree. In Part Two this model of Okun’s Law is connected closely to an analysis of the well-known Kondratiev Wave, a 56-year “Long Wave” of evolving social and economic relationships. This approach to macroeconomics is thereby aligned with a geometric, harmonic and trigonometric analysis of empirical data, rather than purely statistical methods.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46633.

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Date of creation: 30 Apr 2013
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Handle: RePEc:pra:mprapa:46633

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Keywords: Okun’s Law; Kondratiev wave; unemployment; GNP growth; Long wave; trigonometric analysis; unit circle; Okun’s coefficient; steady-state rate of growth; pi; phi; the Golden Mean; harmonic analysis;

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  1. Bernd-O. Heine & Matthias Meyer & Oliver Strangfeld, 2005. "Stylised Facts and the Contribution of Simulation to the Economic Analysis of Budgeting," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 8(4), pages 4.
  2. Laura Piscitelli, . "A Test for Strong Hysteresis," Computing in Economics and Finance 1997, Society for Computational Economics 2, Society for Computational Economics.
  3. Gocke, Matthias, 2002. " Various Concepts of Hysteresis Applied in Economics," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 16(2), pages 167-88, April.
  4. Hughes Hallett, A. J. & Piscitelli, Laura, 2002. "Testing for hysteresis against nonlinear alternatives," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 27(2), pages 303-327, December.
  5. Owyang, Michael T. & Sekhposyan, Tatevik, 2012. "Okun’s law over the business cycle: was the great recession all that different?," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Sep, pages 399-418.
  6. Brent Meyer & Murat Tasci, 2012. "An unstable Okun’s Law, not the best rule of thumb," Economic Commentary, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue June.
  7. Dany Lang & Christian de Peretti, 2009. "A strong hysteretic model of Okun's Law: theory and a preliminary investigation," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 23(4), pages 445-462.
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