general models

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center  (615) 974-4221
Dear Bill Mitchell: You have gotten my position vis-a-vis Barkeley's wrong.
Of course, nonlinear models can include linear models-- but the difference is
that Barkeley and the multi-equilibrium people in general are implicitly
assuming that only nonlinearities can explain less than full employment
equilibrium. In other words, Barkeley's position must be that a linear system
would NOT possess a less than full employment equilibrium. Chaos theorists, New
Keynesians, multiequilibrium people, etc. can NOT explain how a linear system
posses a stable unemployment equilibirum without some fixity. Mine  is a more
GENERAL theory  because it can explain the existence of underemeployment
equilibirum WHETHER THE SYSTEM IS LINEAR OR NONLINEAR. The fact that I can
demonstrate underemployment equilibrium EVENIF THE SYSTEM IS LINEAR means
I am providing a more general theory.  My theory is just as applicable even if
the system is nonlinear-- Barkeley's theory is not applicable to explaining
underemployment equilibrium in linear systems -- unless he introduces some
ad hoc fixity constraint (limitation on the generality of the system) such as
fixed wages or prices, asymetric information, etc. My theory is applicable
whether wages and/or prices are flexible OR not, etc. It is my underlying
axioms that differ from the classical case.
It is not the linear or nonlinear structure
 not some other constraint that I am relying on.

Once the axiom of ergodicity is overthrown, then there is no requirement for
any long-run trend --this long un trend presumes an immutable, i.e., ergodic,
set of structural (linear or nonlinear) relationships -- with actual observatio
ns occuring merely to non-systematic ramdom "shocks". Ergodicity permits one to
say: the business cycle is "transitory ...fluctuation around a deterministic
trend". If you are dubious about this description as you suggest in your email
posting, then you must agree with me that it is the nonergodicty that
is the essence of the problem of less than full employment and empirical ob-
servations cannot systematically lie along a deterministic full employment
trend EVEN IN THE ABSENCE OF RANDOM SCHOCKS.  This does not mean that AT ANY
POINT OF FUTURE (OR PRESENT) TIME, "a range of equilibria occurs depending on
on historical evolution".  A nonergodic system may still have either a single
or a multiple of equilibria at any point of time -- depending on historical
evolution. It also may have single equilibrium at some points of time or
multiple equilbria at these points. And/or other future points it may possess
either single or multiple equilbria. It makes no difference. Moreover, if one
designed a policy that somehow rid the system of nonlinearities, and reduced
it to a linear system, there is still the possibility of a stable underemployme
nt equilibrium.  How much more general do I have to get to convince you?

Have a good day!____Paul Davidson
))))_ fax # (615) 974-1686