New Economics

Business Innovation Economics

But let’s start with data. The new compilation is dubbed DINTEC™ (an
acronym for Data on INnovation TEchnology and EConomics). From it a
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 competitive duplicate C, offered
at a lower price P. In symbols Q = G (P, C, I). For the first time, the cardinal
quality of any product or service can be back-calculated from its price, a feat
currently unthinkable using incumbent hedonic methods.
The MELF is not a regression equation. Q is not an array of attributes (it’s a
single variable). Competition C does not have to be, and is not, perfect. And
exact algebra, more typical in Physics than Applied Economics connects Q,
C and P for the DINTEC™ goods it’s been tested against, and this validates
it for general use.
The MELF goes on to provide an algebraic link from quality to GDP (because
it relates a sum of qualities Sum:Q to a sum of prices Sum:P) and because
of exactness, this leads to an unprecedented 100% determination of
economic growth dominated by Quality.
To 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 innovations on growth. But the MELF provides an exact fit.
There is no residual. This breakthrough delivers a completely new understanding
of the role of innovation in growth accounting.