Fluctuation in the Random Spatial Economy and The Control of Inflation

A self-contained spatial economy is set out as the steady-state of a harmonic oscillator under Gaussian excitation. A dollar bill performs a random walk on a line with elastic barriers at each end and represents payments for traded goods. Diffusive surges of money and the fluctuations in zonal incomes are examined. The center, being less dependent on extra-zonal trade, has fewer brakes on price levels and can more easily begin “inflation.” Imposing a uniform deflationary policy would cause the periphery to be squeezed without reason while the center would be affected too little and too late. The organization of a futures market in construction is analyzed as a spatially discriminating form of control.