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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.

Suggested Citation

  • Albers, Scott, 2013. "Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works," MPRA Paper 46633, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46633
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    File URL: https://mpra.ub.uni-muenchen.de/46633/1/MPRA_paper_46633.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Hughes Hallett, A. J. & Piscitelli, Laura, 2002. "Testing for hysteresis against nonlinear alternatives," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 303-327, December.
    3. Albers, Scott & Albers, Andrew L., 2011. "The Golden Mean, the Arab Spring and a 10-step analysis of American economic history," MPRA Paper 33004, University Library of Munich, Germany.
    4. Gocke, Matthias, 2002. " Various Concepts of Hysteresis Applied in Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 16(2), pages 167-188, April.
    5. Piscitelli, Laura & Cross, Rod & Grinfeld, Michael & Lamba, Harbir, 2000. "A Test for Strong Hysteresis," Computational Economics, Springer;Society for Computational Economics, vol. 15(1-2), pages 59-78, April.
    6. Rod Cross & Michael Grinfeld & Laura Piscitelli, 1999. "Hysteresis in Economic Systems," Computing in Economics and Finance 1999 723, Society for Computational Economics.
    7. 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.
    8. Albers, Scott & Albers, Andrew L., 2012. "On the mathematic prediction of economic and social crises: toward a harmonic interpretation of the Kondratiev wave," MPRA Paper 37771, University Library of Munich, Germany.
    9. 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, vol. 8(4), pages 1-4.
    10. 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.
    11. Oberst, Christian & Oelgemöller, Jens, 2013. "Economic Growth and Regional Labor Market Development in German Regions: Okun’s Law in a Spatial Context," FCN Working Papers 5/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
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    More about this item

    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;

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • P1 - Economic Systems - - Capitalist Systems
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • Z0 - Other Special Topics - - General
    • Z00 - Other Special Topics - - General - - - General

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