New Essentials of Economic Theory

Victor Olkhov

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops economic theory tools and framework free from general equilibrium assumptions. We describe macroeconomics as system of economic agents under action risks. Economic and financial variables of agents, their expectations and transactions between agents define macroeconomic variables. Agents variables depend on transactions between agents and transactions are performed under agents expectations. Agents expectations are formed by economic variables, transactions, expectations of other agents, other factors that impact macroeconomic evolution. We use risk ratings of agents as their coordinates on economic space and approximate description of economic and financial variables, transactions and expectations of numerous separate agents by description of variables, transactions and expectations of aggregated agents as density functions on economic space. Motion of separate agents on economic space due to change of agents risk rating induce economic flows of variables, transactions and expectations and we describe their impact on economic evolution. We apply our model equations to description of business cycles, model wave propagation for disturbances of economic variables and transactions, model asset price fluctuations and argue hidden complexities of classical Black-Scholes-Merton option pricing.

Keywords: economic theory; risk ratings; economic space; economic flows; density functions (search for similar items in EconPapers)
JEL-codes: C00 C18 E30 E32 G00 G12 G17 (search for similar items in EconPapers)
Date: 2019-07-12
New Economics Papers: this item is included in nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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