In a recent report, the World Economic Forum
considered that the use of robots in economic activity will cause far more job
losses in the near future than there will be new ones created. Every economic
sector will be affected. The CLD tries to illustrate the dynamic effects of
replacing human workers with robots. This dynamic indicates that if there is no replacement of
the income forgone by the laid off
workers, then the economy will soon grind to a halt. To avoid disaster, there
must be enough money in circulation, not parked in off-shore investments, to
permit the purchase of all the goods and services produced by robots. The
challenge for the government is to make sure that this is case.
WIP of several books of Karl Polanyi's thoughts and papers around social science economic history and capitalism. . See also Summary of the Great Transformation IM-10640
Added several versions of the model. Added a flow to make C increase. Added a factor to be able to change the value 0.5. Older version cloned at IM-46280
Circularity in Economic models including Exports and Imports
Goodwin cycle IM-2010 with debt and taxes added, modified from Steve Keen. THis can be extended by adding the Ponzi effect of borrowing for speculative investment.
IM-168155 Summary of Ch 27 of Mitchell Wray and Watts Textbook see IM-164967 for book overview with simplified Mike Radzicki's 2003 Evolutionary Economics history article added
This model is an attempt to simulate what is commonly
referred to as the “pesticide treadmill” in agriculture and how it played out
in the cotton industry in Central America after the Second World War until
around the 1990s.
The cotton industry expanded dramatically in Central America
after WW2, increasing from 20,000 hectares to 463,000 in the late 1970s. This
expansion was accompanied by a huge increase in industrial pesticide
application which would eventually become the downfall of the industry.
The primary pest for cotton production, bol weevil, became increasingly
resistant to chemical pesticides as they were applied each year. The
application of pesticides also caused new pests to appear, such as leafworms,
cotton aphids and whitefly, which in turn further fuelled increased application
of pesticides.
The treadmill resulted in massive increases in pesticide
applications: in the early years they were only applied a few times per season,
but this application rose to up to 40 applications per season by the 1970s;
accounting for over 50% of the costs of production in some regions.
The skyrocketing costs associated with increasing pesticide
use were one of the key factors that led to the dramatic decline of the cotton
industry in Central America: decreasing from its peak in the 1970s to less than
100,000 hectares in the 1990s. “In its wake, economic ruin and environmental
devastation were left” as once thriving towns became ghost towns, and once
fertile soils were wasted, eroded and abandoned (Lappe, 1998).
Sources: Douglas L. Murray (1994), Cultivating Crisis: The Human Cost of Pesticides in Latin America, pp35-41;
Francis Moore Lappe et al (1998), World
Hunger: 12 Myths, 2nd Edition, pp54-55.
Wealth can be seen as the factories,
infrastructure, goods and services the population of a nation dispose of. According
to Tim Garrett, a scientist who looks at
the economy from the perspective of physics, it is existing wealth that generates
economic activity and growth. This growth demands the use of energy as no
activity can take place without its use. He also points out that the use of this
energy unavoidably leads to concentrations of CO2 in the
atmosphere. All this, Tim Garrett says, follows from the second law of thermodynamics.
If wealth decreases then so does economic activity and growth. The CLD tries to illustrate how wealth,
ironically, now generates the conditions and feedback loops that may cause it to decline. The consequences are inevitably economic stagnation (or secular recession?).
You can
read about the connection Tim Garrett makes between 'Wealth, Economic Growth,
Energy and CO2 Emissions' simply by
Googling 'Tim Garrett and Economy'.
Like previous models, this model shows the operation of a simple economy, the influence of changes in the consumption rate, and the effect of government intervention. In addition, this model shows changes in the hypothetical general price level. It gives an idea of changes in price trends based on changes in the quantity of money. NOTE: No general price level exists. Prices provide information for the exchange of individual economic goods.
WIP SD representation of Ch11 of their 2007 Monetary Economics book, as suggested by Adam K. Plan is to do a top down simple money flow SFC mmt model and successively split sectors. See also essence of MMT IM and simpler version Ch3 IM
