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A Dynamic, Signals-Based Reinterpretation of Microeconomic Theory

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  • Sarang Shah

Abstract

Economics has long been a science of static equilibria, in which time is a second-order rather than first-order concern. Without time, economic modelers may neglect or obscure the role of time-dependent phenomena, e.g. path-dependency, and limit their ability to compare agnostically the model results with empirical observations. In this article, I outline a dynamic, signals-based recipe for building microeconomic models from traditional static models. I demonstrate this recipe using a classic "desert island" Robinson Crusoe (RC) model of consumption. Starting from a classic static derivation, I then move to a dynamic view, using the utility function as a generator of force on consumption. Finally, I show that the resulting dynamic model may be expressed in Lagrangian and Hamiltonian terms. I conclude by suggesting a recipe for scientific iteration using these alternate mechanical formulations, and the alternative explanations these dynamic models may suggest compared to employing a static approach to modeling.

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  • Sarang Shah, 2025. "A Dynamic, Signals-Based Reinterpretation of Microeconomic Theory," Papers 2508.20268, arXiv.org.
    • Handle: RePEc:arx:papers:2508.20268
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    File URL: http://arxiv.org/pdf/2508.20268
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    References listed on IDEAS

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    1. Matti Estola, 2017. "Newtonian Microeconomics," Springer Books, Springer, number 978-3-319-46879-2, March.
    2. Ryuzo Sato & Rama V. Ramachandran, 2014. "Symmetry and Economic Invariance," Advances in Japanese Business and Economics, Springer, edition 2, number 978-4-431-54430-2, April.
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