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Sakmongkol ak 47

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Thursday, 6 November 2008

Partial vs. General Equilibrium

As expected, sakmongkol’s short essay ( sakmongkol is a gnome for example when compared to bloggers such as Deminegara or even commentators such as Walla) has generated intense reactions. If KJ is reading the post, he will have a fairly good idea of what he is facing.

But the reactions do not disturb sakmongkol’s resolve to see a sense of fairplay. He has taken note of the several counter arguments such as from the ever perceptive and polite JMD and the tantalising and teasing straycat’s strut. .

Sakmongkol is sure if we look hard enough, we can see all the spots in KJ the leopard. But in this short essay, ceteris paribus, Sakmongkol has used another parallel from the field of economics.

So rather than answering his commentators and visitors to his post on a piecemeal basis, he has opted to write a fuller version to explain his essay.

He has used, what is known in economics as a partial equilibrium analysis in trying to establish a hypothesis( or in economics, one strives for a type of economic equilibrium.) the hypotheses being the relationship between a person’s worth and the articulation of his ideas.

In economics, under a state of partial equilibrium, the clearance on the market of some specific goods is obtained independently from prices and quantities demanded and supplied in other markets. In other words, the prices of all substitutes and complements, as well as income levels of consumers are constant. Here the dynamic process is that prices adjust until supply equals demand. It is a powerfully simply technique that allows one to study equilibrium or in our case, the hypothesis that one’s worth can be deduced from the articulation of his ideas.

Sakmongkol is sure and will readily admit, that when the analysis is widened to include the many variables which were pointed by the various commentators, the nature of the hypothesis we are looking for, will likely change. Sakmongkol accepts this, if we had earlier agreed to use general equilibrium analysis.

Now, under General equilibrium we seek to explain the behaviour of supply, demand and prices in a whole economy with several or many markets. In a market system, the prices and production of all goods, including the price of money and interest, are interrelated. A change in the price of one good -- say, bread -- may affect another price, such as bakers' wages. If bakers differ in tastes from others, the demand for bread might be affected by a change in bakers' wages, with a consequent effect on the price of bread.

Calculating the equilibrium price of just one good, in theory, requires an analysis that accounts for all of the millions of different goods that are available..

But we move from different premises. Sakmongkol uses partial equilibrium to isolate the numerous factors which would require computer wizardry to compute. His commentators use general equilibrium since they are more competent than sakmongkol.

Except, in sakmongkol’s analysis, he is sure he was trying to establish one’s worth in relation to the articulation of ideas, while maintaining all other things equal.

4 comments:

Mist,  6 November 2008 at 23:33  

Whatever the equilibrium hypothesis that you use the the pre-condition or assumption that there isa clear and unhampered interaction of the various parameters. The non-linear resistive elements are totally absent from the equation and hence is only a poor representation of the dynamics that is going on, inspite of all the high sounding and impressive rendering of events.

sakmongkol AK47 aka Mat Tomoi 6 November 2008 at 23:42  

mist,

yes- everyone is ultimately entitled to his opinion. linear or non linear. you insist on having the non linear elements, no one can stop you. poor to you perhaps.

A Voice 7 November 2008 at 11:23  

Economics, just like political science, as a social science discipline is not an exact science where mathematics can be applied like physical sciences.

There are attempt to develop mathematical application for economics like econometrics or application of statistics in social science data gathering but the final result may not jive and loses its essence.

The non exact science is a much more difficult subject to analyse, and derive a good forecasting ability.

For fun of writing, I ve used principle from banking like principal and interest and physics's newton law to describe some natural tendencies.

But I am fully aware the problem of applying method from other discipline to the wrong discipline. For the long and short story, politics shoudl be seen and analyse from within the realm of arts or science of the political discipline.

Nevertheless, I am looking forward to see, where your process of elimination to your complete modeling lead to? How many variables it consist? And, what the tedious complicated identification and linkage of the exogenoeus and endogeneous variables will find?

Mist,  7 November 2008 at 21:20  

Sakmongkol,

It is not so much my insistence on having the non-linear elements nor was it about me been entitled to my own opinion. As in all discourses it is hoped that we arrived at a clearer picture of truth and reality. Linear equations are very poor representation of reality and is only a small subset of non-linear dynamics. Mathematical equations are just representation of reality and not reality in itself. It can help us understand reality but it is not a substitute. Our failure to make the distinction often delude ourselves that we know the truth.

Stepping back will often help us see a bit better.

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