Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works
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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 46633.
Date of creation: 30 Apr 2013
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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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This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-05 (All new papers)
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- 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, vol. 23(4), pages 445-462.
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- Brent Meyer & Murat Tasci, 2012. "An unstable Okun’s Law, not the best rule of thumb," Economic Commentary, Federal Reserve Bank of Cleveland, issue June.
- 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, issue Sep, pages 399-418.
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