3 ms·
The classic failure for me is the damping harmonics you get from the delay in a corrective response to a change input. It's control theory 101. Loans take time
by neilwilson 7y ago
The classic failure for me is the damping harmonics you get from the delay in a corrective response to a change input. It's control theory 101.
Loans take time to approve and issue, therefore interest rate changes, even if all the other assumptions stack up, suffer from such control harmonics. They end up being just as badly targeted as the discretionary fiscal policy decisions they are supposed to replace.
That problem is hand waved away using 'expectations', which when you dig down requires the entities in the calculation to have perfect foresight over infinite time. ie they can see the future.
And such expectations would 'correct' the discretionary fiscal policy approach too.
- BurningFrog 7y agoYou seem to be talking about macroeconomics, which is a very different animal than supply/demand dynamics. Macroeconomics is a science all my itself, and by and in some ways a failed one. It may even be impossible as a (public) science, since the object of the study is intelligent, aware of the findings, and has incentive to change in response to it. This have very little to do with basic the microeconomic of supply/demand dynamics. Which could better be named "Price Theory".