# A Dynamic, Signals-Based Reinterpretation of Microeconomic Theory

## TL;DR

This paper introduces a dynamic, signals-based approach to microeconomic modeling, emphasizing the importance of time-dependent phenomena and providing a framework that extends static models into dynamic, mechanical formulations.

## Contribution

It presents a novel recipe for transforming static microeconomic models into dynamic ones using signals, and demonstrates this with a classic Robinson Crusoe model, incorporating Lagrangian and Hamiltonian formulations.

## Key findings

- Dynamic models capture time-dependent phenomena like path-dependency.
- Static models can be extended into dynamic frameworks using signals.
- Mechanical formulations offer new insights into economic behavior.

## Abstract

Economics has long been a science of static equilibria, in which time is a second-order rather than first-order concern. Without time, economic modelers may neglect or obscure the role of time-dependent phenomena, e.g. path-dependency, and limit their ability to compare agnostically the model results with empirical observations. In this article, I outline a dynamic, signals-based recipe for building microeconomic models from traditional static models. I demonstrate this recipe using a classic "desert island" Robinson Crusoe (RC) model of consumption. Starting from a classic static derivation, I then move to a dynamic view, using the utility function as a generator of force on consumption. Finally, I show that the resulting dynamic model may be expressed in Lagrangian and Hamiltonian terms. I conclude by suggesting a recipe for scientific iteration using these alternate mechanical formulations, and the alternative explanations these dynamic models may suggest compared to employing a static approach to modeling.