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Economics

Simple Economy: Model 8

Jim Berger
This model shows the operation of a simple economy. It demonstrates the effect of changes in the fractional rate of consumption (or the converse the fractional rate of saving.)

In summary, lower rates of consumption (based on production) result in higher rates of production and consumption in the long-run.

Economics Economic Growth

  • 3 years 2 weeks ago

Monetary Reality

Hanns-Jürgen Hodann
Spending by the government creates its own 'financial resource' as the process of crediting an account in the private sector takes place. This may sound like nonsense, but in fact it is 'monetary reality'. This premise is supported by Bell (1998; 2000) and Wray (1998a) who argue that the Treasury does not need to collect or borrow funds in order to spend, but crates new funds as it spends.

Perhaps the following thought experiment  helps to understand how this is possible.  

If you imagine two drawers, each representing an account. The first drawer contains 100 gold coins and the second is empty. Also imagine that there are no other gold coins available at this time. Let's call the first drawer account A and the second account B. Now if you want to transfer 30 gold coins from account A to account B, you would actually first have to take the coins out of drawer A and then place them into drawer B. Account A will then necessarily have 30 coins less in it. Now imagine accounts A and B are held in a computer as electronic money. Instead of 100 gold coins, account A only contains the computer generated number '100'  and account B shows '0'. To get account B to show a balance of '30', it would now simple be necessary to change the '0' to '30' on the computer. The need to raid account A and to take '30' from the number '100' before you could credit  account B does not exist. Money is created as it is entered in B's account irrespective of whether A's account is debited before or after this process or not at

Economics Aggregate Demand Fiscal Spending Modern Money MMT National Debt Debt Issue Tax Revenue Government Spending

  • 9 months 2 weeks ago

20120908a_InvestmentVsAusterity

Paul Newton

I propose we grow this sim model (or similar) over time to help ourselves better understand the opposing investment and austerity strategies now being advocated for the U.S. government. The hope is to build as simple a model as possible that subsumes the major underlying feedback loops that probably exist in the mental models of proponents of each of these positions. Starting this model was inspired by this Investment vs. Austerity discussion http://www.linkedin.com/groups/Investment-vs-Austerity-How-can-4582801.S.157876413

Economics Austerity Macroeconomy National Investment

  • 6 years 2 months ago

Simple Economy: Model 5

Jim Berger
This model shows the structure and operation of a simple economy. It can represent economic systems at different levels of abstraction (e.g. a single good, a group of goods, multiple groups, & an "economy.")

This model has one significant difference from Model 4. The fractional consumption rate table serves the purpose of demonstrating the effects of changes in the fractional consumption rate (or the converse the fractional rate of saving) from 100% to less-than 100% to more-than 100%.

It demonstrates dramatically the effects of significant changes in consumption rates.

Economics Economic Growth

  • 3 years 2 weeks ago

Simple Economy: Model 2

Jim Berger
This model also shows the operation of a simple economy. It differs from Model 1 primarily in the representation of all goods in the economy by units of measure of a higher level of abstraction. Thus, the same model can represent economies at different levels.

The simulation demonstrates how differing rates of consumption affect Savings.

Economics

  • 3 years 2 weeks ago

Simple Economy: Model 7

Jim Berger
Like Model 6 this model shows the operation of a simple economy. It demonstrates the effect of changes in the fractional rate of consumption (or the converse the fractional rate of saving.)

In summary, government "spending" tends to slow growth of production and consumption.

Economics

  • 3 years 2 weeks ago

MANAGING FULL EMPLOYMENT

Hanns-Jürgen Hodann

MODERN MONETARY THEORY SHOWS HOW FULL EMPLOYMENT CAN BE ACHIEVED!

POTENTIAL GDP is a level of overall spending - by the government and the non-government sector - at which there is full employment. If the economy is not operating at its potential, then the  private sector has failed to invested or spend enough to generate the necessary growth nor has income  from net exports contributed enough. This only leaves the government to close the spending gap. Conceptually, a government disposing of its own freely floating currency could act using two powerful tools -  spending in excess of tax revenue, and taxation - to ensure that the gap between the actual economic activity and potential GDP is quickly closed. Achieving the  full employment that prevailed for 30 years between 1945 and 1975 in western economies is definitely possible! 

Modern Monetary Theory Policy Full Employment Economics

  • 1 year 10 months ago

Simple Economy: Model 3

Jim Berger
This model shows the operation of a simple economy with two modifications made to Model 2 -- 1) feedback from production rate to consumption rate and 2) the use of a fractional rate input for calculating consumption rate. 

In summary, lower fractional rates of consumption (based on production) result in higher levels of Savings.

Economics

  • 3 years 2 weeks ago

Investment and Output 2

Hanns-Jürgen Hodann
Here I've translated the macoreconomic rule 'SPENDING = INCOME = OUTPUT, WHICH DRIVES EMPLOYMENT' into a negative feedback loop by adding an explicit goal of Output and Employment. As shown in 'Investment and Output 1', all the income earned has to be spent to maintain output and employment. Any shorfall in spending can be made up by any of the three sectors that contribute to total output. However, when spending/investment by the private sector is too small to maintain the required level of overall spending and the exports do not contribute enough to compensate for this shortfall then only the government can save the day through Net Spending, i.e. spending more than it collects in tax revenue. Taxation at any rate, according to Modern Monetary Theory (MMT) does not serve the purpose of financing spending but can be used legitimately to slow down an overheating economy. I have not taken into account 'structural reforms', which are often subject to the 'Fallacy of Composition' and of dubious value, at least in a recessive climate, according to MMT.

Economics Growth Output Gap

  • 4 years 5 months ago

Bubbles and Feedback Loops

Hanns-Jürgen Hodann

Nobody seems to notice bubbles until they burst. One possible reason is that those caught up in a bubble are completely blinded by the grip, the overpowering logic and force excerted by the positive feedback loop that drives it. Financial bubbles occur time and time again - and nobody seems to learn. Another example on a different time scale is an argument that spins out of control and ends in violence. The participants seem to be blind to the consequences; the immediate and imperative logic of the feedback loop imposes itself. The vortex created by the feedback loop even seems to draw in outsiders, such as new investors. Is this the reason why we don't notice bubbles? This explanation is meant to stimulate discussion!

Economics

  • 6 years 7 months ago

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