Ergodicity Economics in Plain English

Abstract

Ergodicity economics (EE) applies a modern mathematical formalization to familiar financial concepts to reveal implications and consequences that were previously unseen. EE quantifies the differences and the trade-offs between the collective meaning and the individual meaning of financial methods. EE’s perspective opens up previously unseen distinctions for evidence-based recommendations. These distinctions enable the creation of previously unavailable recommendations for the explicit benefit of individual clients. This differentiating impact on economic theory, asset valuation, product development, and advisory best practices is developing rapidly.

Keywords: Ergodicity Economics, Growth Dynamic, Arithmetic Mean, Geometric Mean, Ensemble Average, Time, Average, Growth Optimality

JEL Classification: G0, G10, G11