New Economics

Business Innovation Economics

From data collected for the period 1951-2001 and dubbed DINTEC™ (an
acronym for Data on INnovation TEchnology and EConomics) a new and
previously unknown equation called the Macroscopic Economic Lens
Formula, or MELF (whose name is explained later) has been discovered.
It incorporates new variables and works like this. Purchasers will pay more
for higher performing products and services (described in Economics as
having higher quality Q), while favoring a lower price option offered due
to competition C. In symbols Q = G (P, C). For the first time, the cardinal
quality of any product or service can be back-calculated from its real price,
a feat unthinkable using current methods.
Exact algebra, more typical in Physics than Applied Economics, connects Q,
P and C. Its G is validated using application data from DINTEC™ for
multiple and diverse commercial instances.
This is not the typical regression procedure. Data is not used up to find
the equation. It is reserved for its authentication.
This means the MELF can provide a convincing algebraic link from quality to
GDP (by relating a sum of prices Sum:P to a sum of qualities Sum:Q) leading
to an unprecedented 100% determination of economic growth that is
dominated by Quality change considerations.
In contrast and to force-fit labor and capital to GDP, current macroeconomics
generates a residual called Total Factor Productivity, TFP, which is interpreted
as a proxy for the impact of innovation on growth. But the MELF provides an
exact fit. There is no residual. This breakthrough delivers a completely new
and commanding role for innovation in growth accounting.