Tag Archives: information transfer economics

Econo-physicist Jason Smith demonstrates how to deal with a failed model forecast — acknowledge it, explain it, learn from it, and move on to improving the process. Information Transfer EconomicsCalling a recession too early (and incorrectly)Jason Smith

After seven years of economic research and developing forecasting models that have outperformed the experts, author, blogger, and physicist Dr. Jason Smith offers his controversial insights about the major driving factors behind the economy derived from the data and it's not economics — it's social changes. These social changes are behind the questions of who gets to work, how those workers organize, and how workers identify politically — and it is through labor markets that these social...

The information transfer model tracks this pretty well. Information Transfer EconomicsUnions, inequality, and labor shareJason Smith

Jan Hatzius made some macro projections about wages, unemployment, and inflation: Goldman’s Jan Hatzius wrote Sunday that unemployment should continue to decline to 3% by early 2020, noting the labor market also has room to accommodate more wage growth. Hatzius predicted that average hourly earnings would likely grow in the 3.25% to 3.50% range over the next year. ... For now, Goldman has a baseline forecast of 2.3% for core PCE ... Well, these are all roughly consistent with Dynamic...

Jason Smith comments on J. W. Mason and Arun Jayadev on MMT and conventional economics from the point of view of scientific modeling in macro.Information Transfer EconomicsWhat do equations mean?Jason Smith

Unfortunately, Shannon's entropy, often referred to as information entropy, and then shortened to just information, is often confused with the colloquial term "information". This brings connotations of data, of knowledge, of specific sets of symbols with specific meaning. But as Shannon and Weaver said in their book from a year later, we must not confuse information theory information with meaning. This collision of terminology is amplified when it encounters economics, where information...

I always like looking at the data for other countries than the US — laziness and the ease of accessing FRED data are big reasons for most of the models being tested on US data. Additionally, the political economy of the US tends to bring up more US-centric questions.I'm also not very well informed about a lot of the political economy and economic history of other countries. This is both good and bad. It's good because it means I don't go modeling the data with a preconceived economic...

Looking at the recent data and assuming the dynamic equilibrium model is correct along with a linear trend in rate increases, we see that the indicator will enter the error band sometime before 2020:… However, the period of time the spread spends inside that error band ranges from a few months to a year (yield curve inversion is usually described as being an indicator a recession will happen within a year). So unless we have other data, we won't be able to predict the timing of this future...

Now you might wonder how raising interest rates to only about 2% could trigger a recession today in the same way raising interest rates to 14% did in the 80s. I admit I don't have a good answer to this except to say increasing labor force participation in the 80s probably provided a sufficient tailwind that Fed had to do do much more.In any case, this makes for an excellent test of the model. Interest rates should come back down in the near term (about 6 months). A possible mechanism to...

More on the foundations of economics. Information Transfer EconomicsThe economic way of thinking?Jason Smith