tag:blogger.com,1999:blog-5908830827135060852.post6028279008483621795..comments2023-11-29T05:01:37.835-05:00Comments on Bond Economics: Advantages Of Discrete Time Models In EconomicsBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-5908830827135060852.post-47524289444058629242017-05-18T12:41:50.247-04:002017-05-18T12:41:50.247-04:00Quote attributed to James Tobin from the link abov...Quote attributed to James Tobin from the link above : "From one period to the next asset stocks jump by finite amounts."<br /><br />Financial stability or instability is not due to the mere passage of time or the introduction of time into models, but rather, most likely it is due to the fact that intelligent agents (lenders, investors) adjust behavior in a relatively coordinated fashion. During an asset price boom the prices adjust upward as assets turn over with newly created debt at the margin for producing new assets and for resale of comparable old assets in primary markets. During an asset price bust the prices adjust rapidly downward as assets turn over without much newly created debt (collateral values are falling so debt finance dries up) and new production does not materialize for a class of assets which are falling in price so levels of investment go down. The feedback between debt, asset prices, and economic stability is a variable parameter set by intelligent agents operating with a model for the behavior of the other intelligent agents. When others are financing assets with new debt it is rational to invest up until one things the others will stop refinancing asset prices higher with new debt then it is rational to seek liquidity or to avoid purchasing assets with debt finance. The timing of the change in rational behavior is not certain because one is trying to anticipate the greed or fear of financial intermediaries (who provide or withhold credit) and of investors holding a wide variety of gains or losses in particular asset positions.<br /><br />In growth stock investing there is a paradox: a new high price means all old owners are sitting in a gain and only very short term owners, such as high frequency traders or day traders, may be taking a loss on a position. An investor holding a gain tends to be less fearful then one taking a loss, therefore secondary markets are prone to asset price bubbles even in a normal period due to feedback from rational psychology and distributed decisions of intelligent agents.<br /><br />Regarding the use of a digital computer to solve a continuous-time system there are only two methods: either the exact solution is known in the calculus using symbolic methods, and it can be solved using a symbolic solver; or a numerical method must be used to approximate the continuous-time solution using a discrete-time system model.Joe Leotehttps://www.blogger.com/profile/01292763300917387201noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-73629851911876797252017-05-18T06:32:17.138-04:002017-05-18T06:32:17.138-04:00It seems to me that when we build a model that unf...It seems to me that when we build a model that unfolds over time, it becomes unpredictable except for the assumptions we place into action. We are making those action assumptions at the time of construction, not at the discrete future time when it finally arrives. <br /><br />Hence, the tedious process of calculating sequential interim levels and applying predicted responses is merely a detailed projection of current thinking.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-76404138386015091602017-05-18T03:44:02.374-04:002017-05-18T03:44:02.374-04:00It's not just the data - the real world is dis...It's not just the data - the real world is discrete.<br /><br />Actual economic activity consists of a large number of discrete transactions, not a set of continuous processes. A "true" model might divide time so that every single transaction fell into its own separate (but very, very short time period). All a normal discrete model does is dial down the granularity, so that a single time period covers many transactions.<br /><br />(One caveat here is that within a business day, the actual order of transactions may be ambiguous, but that arguably makes it even less like a continuous function.) Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-58909374995084572262017-05-17T20:04:02.697-04:002017-05-17T20:04:02.697-04:00Tobin = sensibleTobin = sensibleJKHhttps://www.blogger.com/profile/06322177539880818556noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-83163987324259565472017-05-17T16:47:51.128-04:002017-05-17T16:47:51.128-04:00The first reason is that I had never heard of it u...The first reason is that I had never heard of it until you mentioned it. The second is that my package develops the equations from a high level description of the economy (using objects). Don't know enough about SimPy to know how much it would help on that task. Finally, I want control over the solution method. If the SimPy solver helps me, I could try interfacing to it, but otherwise I want the ability to use whatever library is available for the problem at hand. I expect that I will need to develop my own solver for some problems.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-36620248664632135852017-05-17T16:41:02.293-04:002017-05-17T16:41:02.293-04:00I didn't have time to go through the entire ar...I didn't have time to go through the entire article; in what section did he refer to a time constant? Thanks.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-43681068328816771142017-05-17T16:38:17.020-04:002017-05-17T16:38:17.020-04:00Thanks. I could possibly work that in.Thanks. I could possibly work that in.Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-53420790885529914672017-05-17T14:53:39.185-04:002017-05-17T14:53:39.185-04:00btw, did you say why you didn't just use SimPy...btw, did you say why you didn't just use SimPy for your modelling?NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-48556627268135775852017-05-17T14:42:34.340-04:002017-05-17T14:42:34.340-04:00My understanding of minksy is that the equations m...My understanding of minksy is that the equations may be continuous time format, but the program steps along in fixed steps. Keen refers in https://keenomics.s3.amazonaws.com/debtdeflation_media/papers/PaperPrePublicationProof.pdf to using time constants for the steps.NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-24633484787792978992017-05-17T14:38:37.137-04:002017-05-17T14:38:37.137-04:00Good post.
Quote James Tobin here:
https://www...Good post. <br /><br />Quote James Tobin here: <br /><br />https://www.concertedaction.com/2016/03/05/discrete-time-or-continuous-time/Ramananhttp://www.concertedaction.comnoreply@blogger.com