Research Publication: Essentialist Price Change Equilibrium

 

I changed my mind, I'm publishing my last idea now :).


Outline/Summary:


1 - Priorities list as utility bundle


Instead of using a utility bundle and listing a set of things that a person wants at a particular wealth value, we can provide a list of priorities.  The first item, which is an item and a positive integer quantity of how many to purchase, is the first thing that the person will spend their wealth on.  If they run out of wealth while purchasing the first thing, they will not purchase anything more, and will stop buying at the last whole number item of the thing that they can afford.  They can go on to the second thing, and third thing, and so on, and will continue until they have either bought everything they could possibly need--exhausting the list--or, they have run out of wealth for that time step.


As we will see in a moment, we can deal with the issue of changing one's mind when having more money with "replacement coupons."  These "replacement coupons" also, in this alternate version of demand, give us a strict version of the law of demand without any Giffen good effect or wealth effect.



2 - Many instances of product A to many instances of product B coupon for sale--transforms products from A to B, the coupon is of obvious price for replacement, eliminates Giffen effect and wealth effect and allows the priorities list thing to capture all utility bundles, by allowing products to be replaced after purchase; can be combined with other coupons to create the effect of "many instances of many products to many instances of many products."


Suppose a consumer had as their #1 priority, "buy 8 items of mashed potatoes."  Their #2 item was, "buy 5 pairs of socks."  Then, their third item might be, "a coupon that replaces 3 items of mashed potatoes with 2 items of caviar."  The price of that coupon will be exactly what it costs to replace 3 items of mashed potatoes with 2 items of caviar, i.e., 2*caviar_price - 3*mashed_potatoes price.  If the consumer has this "replacement coupon", she can immediately replace 3 mashed potatoes items that she owns with 2 caviar items.  This solves many paradoxes.



3 - the law of desperation:  when the GDP of the market/system in question goes up more, the prices of "highly essential" (i.e., highly purchased at beginning levels in the priorities list) items decrease more, and the prices of "less essential" items increase more


4 - the essentialist price change equilibrium--a set of price changes is in equilibrium if as the GDP goes up and down, the prices fully conform to the law of desperation in every case


5 - the price change unhealthiness score - if a price change set is not in equilibrium, the shortest distance from the equilibrium is the unhealthiness score of the economy


6 - hypothesis:  law of GDP growth - an economic system's future GDP growth is inversely correlated with its price change unhealthiness score--the lower the unhealthiness, the higher the expected GDP



(I have a precise way to calculate "highly essentialness" but I omitted it from this write-up.)



I used my hypothesis, in #6, to predict that the USA will enter a recession with a year or two from the time I made the prediction.  It was based on a news article I read about Americans' ability to afford cars and homes, which are "highly essential" goods because even though they are expensive, they show up early in consumers' "priorities lists."

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