Introduction MELF Equation Macro Metrics Micro Metrics Beyond GDP How To Access Acknowledgements About Us
where missing pieces can be found,
Innovation in Economics
A new and previously unknown growth determining equation has been discovered. It arises from an analogy between creative destruction for money in an economy and species competition for food in nature. It overcomes the limiting anchor of current evolutionary modeling, which is the firm; an entity with little correspondence in nature. This breakthrough has new variables that work like this. Purchasers will pay more for higher performing products and services (described (only) in Economics as having higher 'quality' Q), while favoring a lower price option P offered from competition C. In symbols Q = G (P, C). Where G represents an exact algebra discovered by logical argument - not by regression - when modeling commercial instances of creative destruction contained within DINTEC™(1951-2001) data. For the first time, the cardinal 'quality' of any product or service can be back- calculated from its real price. In addition, this Macroscopic Economic Lens Formula, or 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 Factor Productivity, TFP or MFP, either of 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 radically new and commanding role for innovation in growth accounting.
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MELF Equation