Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works
“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.
|Date of creation:||30 Apr 2013|
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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.
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- Rod Cross & Michael Grinfeld & Laura Piscitelli, 1999. "Hysteresis in Economic Systems," Computing in Economics and Finance 1999 723, Society for Computational Economics.
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