Re: Gravity model of trade volumes
I would bet it was based on the gravity trade model in GT:FT, which is using a 2d map where 1/D makes sense. It's unclear what the exponent should be on a 3d map, we don't have any real-world models to look at (the terrestrial case is generally close enough to 2d that it can be called 2d).
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Re: Gravity model of trade volumes
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It looks like a simple omission -- there should be another variable as an exponent on the distance factor. Quote:
Part of the problem with this subject is that the gravity trade model is an empirical observation, not a theoretical result. There are a number of competing explanations for why it works across such a wide range of applications -- and thus, at least as many possible ways to extend it to three dimensions. The actual exponent for international trade is more like 1.9 than 2.0, by the way, but that's close enough to the square to make "gravity model" a reasonably accurate description. |
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Re: Gravity model of trade volumes
I'm over a thousand miles away from my notes, and I don't recall enough to know whether there's just a dropped exponent there, but I suspect there is. What we've really got here is the economic equivalent of Olbers' paradox - and just as the sky is dark at night, you really don't want your model predicting an infinite amount of trade coming in to every world in the galaxy.
If you lot can agree on a reasonable value for the exponent in a three-dimensional universe, and submit an erratum, I'd be happy to nod my head and say "yes" when the buck gets passed to my desk. |
Re: Gravity model of trade volumes
The missing factor on trade models is the fact that the larger the network of potential trade partners, the lower the trade with any given partner. That's what would actually prevent Olber's Paradox in this case, though adjusting the exponent for range may not be a bad idea regardless.
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But still if you know better on a subject, it's hard to sometimes let the grossly unrealistic stuff just fly. Myself, I just picked up Business for Dummies, so this is all news to be. |
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