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 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
unthinkable using current methods.
Exact algebra, more typical in Physics than Applied Economics connects Q,
C and P. And extensive comparisons with application data (using DINTEC™)
validates it.
This ability to explain and predict separates it from the inherent unreliability
of equations arrived at by - the usual - regression method.
The MELF can therefore provide an algebraic link from quality to GDP (by
relating a sum of prices Sum:P to a sum of qualities Sum:Q) and this leads
to an unprecedented 100% determination of economic growth that is
dominated by Quality consideration.
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
dominating role for innovation in growth accounting.