sthomper wrote:
dont succesful businesses use mathematical models of some variety to predict human action all the time?
Yes, businesses are constantly modeling to analyze sales and manufacturing strategies. For example:
Above is a simple spreadsheet model that displays how many more items must be sold to maintain the same amount of gross profit upon a price reduction. If the sale price is reduced from $1,000 to $900, then 30 units must be sold instead of 20 (base). Total sales must go from $20,000 to $27,000.
If costs per item are reduced from $700 to $600, then only 15 units need to be sold instead of 20 (base). Total sales can be reduced from $20,000 to $15,000.
Armed with this modeling tool, questions are quantified. Is it possible to sell 50% more units? Are there enough customers? Marketing leads? Mfg capacity? You can keep tweaking price, costs and sales to formulate strategies with other groups in your company. A new base may be established to help establish sales expectations at various time intervals.
The effects of the exponential growth of debt may also be modeled:
In this simple spreadsheet model, we can see that the amount of debt and the gap between money and debt will perpetually grow even if the money supply is not increased. As the gap grows, the money supply (if constant) becomes a smaller and smaller percentage of the total debt. For example, if it is 27% now (15/55) it will eventually be reduced to 17% (15/85). The result would be that the money supply would effectively contract.
In order to keep the same ratio as now, the money supply (M3) would need to be expanded from $15 trillion to $23 trillion. This would raise the total debt from $100 trillion to $108 trillion and the gap from $85 trillion to $93 trillion.
Since all new money may only be created as debt, we can see that we will never be able to repay the debt and it will grow exponentially.
This simple spreadsheet does not take the human element into account other than to project that every person in the U.S. (300 million) will need to borrow $9,862 dollars a year. A family of four will need to borrow almost $40,000 per year. Can this be sustained? I should mention that what ever the government borrows may be subtracted from private sector borrowing projections.
The modeling can be refined by adding historical trends, impact of interest rates, unemployment, income averages, GDP, etc. A range may be calculated to analyze the required human behavior. For example, will the average person need to take on a second job?
The model may be further refined by using higher math logic. For example, Laplace transformations may be applied.
Cheers,
Larry
for example, Myron Scholes, the Nobel Prize-winning economist, partnered in the famous “Black–Scholes” option pricing model’s differential equation (Scholes is said to be the father of the derivatives market).
The equation was based on a widely used heat transfer calculation, thus an engineering approach. Yea, derivatives are terrible from the peoples prospective, but genius for malevolent banks. If allowed to continue, the big banks using this model will have all wealth transferred to them.
