REPLY Meaning of Stock/Level (SD6939)

[SDMAIL Mabel Fong]

Posted by  Mabel Fong <may_belle_66 at yahoo.com>

 Hi:
 
I have been following these posts in hopes that someone
might educate me as to the nature of financial stocks as they occur in macroeconomic
systems.
 
The hard state variables of economics are obviously the
physical stocks of commodities; and the business of economic science is therefore
to account for the distribution of these stocks among economic sectors.
 
Transactions of physical quanta occur in an ever-changing
price environment, and these give rise to financial flows among the sectors. Financial
flows continuously create financial state variables that are certainly potent
matters of economic causation in capitalist systems: their levels presumably determine
what to produce, what to demand, and the transaction prices themselves.
 
In sum, the monetary stocks of the economy can be observed operating
in the manner of hard state variables, such as the physical stocks whose levels
determine physical production rates. But their import at a given moment is
entirely contingent on the prices of that moment, even though the dollars now in
a financial state variable were acquired under ‘who knows what’ earlier price
regimes.
 
I assume SD sets little store by economics’ monetary models
because the unit in which money is measured is subject to constant redefinition
by means that must remain unknowable until monetary flows are separated into
physical flows and the prices at which they occur. But does SD have a handle on
past monetary flows’ effects on current prices’ absolute levels? Or do you hold
that there is no sense in which price levels are absolute in the sense that a
physical stock is absolute?
 
Or put the question in terms of physical stocks: I observe
that SD models typically record changes in physical stocks, but these seldom
give rise to changes in the values at which those stocks are held – which, it
seems to me, should be at least partly determinative of how the stocks are
disposed.
 
Where I have seen prices feeding back into the uses made of
physical stocks, these prices have been the artifacts of ‘supply/demand pressures’
having no connection to monetary stocks developed out of the history of prices
and physical flows. Once again, the premise seems to be that price levels are
not hard state variables; and, by inference, neither are financial state
variables.
 
Mabel
Posted by  Mabel Fong <may_belle_66 at yahoo.com>
posting date  Sat, 19 Apr 2008 14:37:14 -0700 (PDT)