Economics | Insight Maker

WIP Ideas from Science Special Issue May 2014

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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

20120908a_InvestmentVsAusterity

Paul Newton

Goodwin cycle IM-2010 with debt and taxes added, modified from Steve Keen's illustration of Hyman Minsky's Financial Instability Hypothesis "stability begets instability". This can be extended by adding the Ponzi effect of borrowing for speculative investment.

Minsky Financial Instability Model

Geoff McDonnell

26

Clone of Wagdy Samir Macroeconomics work in progress IM-901 Additions and deletions based on Robert Skidelsky's description of Keynes general THeory from his Biography Vol2 p 549 -571

Clone of Keynes General Theory

Martin Eden

Simulation of MTBF with controls

F(t) = 1 - e ^ -λt

Where

• F(t) is the probability of failure

• λ is the failure rate in 1/time unit (1/h, for example)

• t is the observed service life (h, for example)

The inverse curve is the trust time
On the right the increase in failures brings its inverse which is loss of trust and move into suspicion and lack of confidence.
This can be seen in strategic social applications with those who put economy before providing the priorities of the basic living infrastructures for all.

This applies to policies and strategic decisions as well as physical equipment.
A) Equipment wears out through friction and preventive maintenance can increase the useful lifetime,
B) Policies/working practices/guidelines have to be updated to reflect changes in the external environment and eventually be replaced when for instance a population rises too large (constitutional changes are required to keep pace with evolution, e.g. the concepts of the ancient Greeks, 3000 years ago, who based their thoughts on a small population cannot be applied in 2013 except where populations can be contained into productive working communities with balanced profit and loss centers to ensure sustainability)

Early Life

If we follow the slope from the leftmost start to where it begins to flatten out this can be considered the first period. The first period is characterized by a decreasing failure rate. It is what occurs during the “early life” of a population of units. The weaker units fail leaving a population that is more rigorous.

Useful Life

The next period is the flat bottom portion of the graph. It is called the “useful life” period. Failures occur more in a random sequence during this time. It is difficult to predict which failure mode will occur, but the rate of failures is predictable. Notice the constant slope.

Wearout

The third period begins at the point where the slope begins to increase and extends to the rightmost end of the graph. This is what happens when units become old and begin to fail at an increasing rate. It is called the “wearout” period.

BATHTUB MEAN TIME BETWEEN FAILURE (MTBF) RISK

Guy Lakeman

7

This is part of series of model implemented from "Thinking in Systems" book by Donella Meadows

Thinking in Systems - Economic Capital - Fig 37, 44

Sudharsan

Unfortunately, this model only produces the illusion of functioning, but I did manage to get it to give me the graph. However, because of the use of flows, if you change the time step to and the simulation length to anything other than the same numbers, you'll find the graph showing something that looks more exponential. This is due to the function referencing itself in regards to time, so inevitably each time consumption grows it changes the outcome on the other side of the equation. Still, this is a convincing mock up. I added a "45 degree" line so that one could conceivably see (and also change) the difference made by altering the level of autonomous consumption.

Keynesian Macroeconomics

Nicholas Lowe

4

Irving Fisher's Debt Deflation Theory from Michael Joffe Fig. 3.4 p54 Ch3 Feedback Economics Book with Private Credit Inflation boom added to the bust cycles

Irving Fisher's Debt Deflation Theory

Geoff McDonnell

An initial study of the economics of single use coffee pods.

Coffee Pods ISD Humanities

Kevin Collins

409

Graph representation of Ch3 of their 2007 Monetary Economics book, based on Alvarez and Ehnts 2015 paper The roads not taken. Also see more complex WIP to successively split sectors at IM-185550 . See also essence of MMT IM for simpler intro

Godley and Lavoie Simple Growth Model

Geoff McDonnell

This model shows the basic functioning and dynamics of a 'modern monetary system'.

The non-government sectors, consisting of the private and foreign sectors initial y starts with zero currency units. It is important to realize that after creating a new currency the government must first spend currency units into the economy before they can be used: without currency units the private sector could not even pay taxes! A government that has its own freely floating currency can create a much money as it wants. It does not need tax receipts to finance its spending, and any money it spends into the economy above that collected in taxes represents income for the private sector. The model show that the government initially created 9 trillion money units, but spent only six trillion into the economy. The six trillion showed up as a government deficit, but also as wealth in the non-government sector.

Since the government can create as many money units as it wishes and transfer them to the private sector to ensure an adequate level of demand in the in the economy, austerity is unnecessary: money is available, though real resource may be scarce. This also shows that the government can contribute actively towards the creation of prosperity.

Please note that this model was originally created by Gene Bellinger, IM 3206, from which this version was cloned.

Clone of Austerity vs Prosperity

Hanns-Jürgen Hodann

This is a simplification of the Austerity vs Prosperity model in the hope that it will be easier to understand.

@LinkedIn, Twitter, YouTube

Austerity vs Prosperity v0

Gene Bellinger

There is an old saying that says that 'opportunity makes thieves'. But there is also a research paper entitled 'Opportunity makes the Thief: Practical Theory of Crime Prevention (1998)' that provides evidence supporting this common observation. The paper argues that opportunity is a “root cause” of crime. This therefore also applies to the behaviour of corporations.

The Causal Loop Diagram on the left indicates that the number of crimes will increase rapidly as the opportunities to commit them increases. This suggests that the introduction of a negative feedback loop aimed at diminishing opportunities for committing crimes is an appropriate measure to improve the situation. A number of remedial mesures tailored to specific situations are contained in the report. A generally effective means must be the use of law and regulations that were also mentioned in the report.

Opportunity makes Thieves

Hanns-Jürgen Hodann

Implementation of a DSGE Model solved in a Macroeconomics class by Harald Uhlig (link), using Rational Expectations, in this case, the Hansens Real Business Cycle Model.

It shows the capacity of implementing Dynamic Stochastic General Equilibrium Model Analysis using System Dynamics.

Real Business Cycle Model (DSGE)

Fernando Fernandes Neto

Wagdy Samir work in progress. Addition of Bill Mitchell's draft textbook chapter1 See also The value of everything book IM

MacroEconomics

Geoff McDonnell

5

A simple budget planning system. What additional complexities can you add?

ISD Savings Plan

Kevin Collins

126

This model shows the operation of an extremely simple economy. The system produces and consumes each item (or good) at a fixed rate.

When production exceeds consumption, consumer goods accumulate in stocks. Trading may occur between actors in this system. That will not, however, affect the quantities of the stocks of goods. It only affects ownership (not a concern of this model.)

Simple Economy: Model 1

Jim Berger

3

WIP based on Where profits come from paper , Nathan Tankus blog and other historical sources

Monetary Circuit Flows

Geoff McDonnell

WIP Comparing Univeral Basic Income Guarantee with the Job Guarantee based on comparison articles

UBI and Job Guarantee Comparison

Geoff McDonnell

WIP based on Bill mitchell's blogs.

Sectoral balances are relationships among money flows during an accounting period. Where we perceive accumulations of past imbalances to be accrued is another matter....

MMT Fiscal position

Geoff McDonnell

3

An attempt to combine ideas from Joe Stiglitz's Book The Price of Inequality, Peter Turchin's book Secular Cycles and Khalil Saeed and Oleg Pavlov's Dynastic Cycles SD model paper

Inequality Crisis and Secular Cycles

Geoff McDonnell

3

Regulation of resource allocation to service in response to service quality. A non-price-mediated resource allocation system. From Sterman JD Business Dynamics p172 Fig 5-27

Service Quality Balancing Loops

Geoff McDonnell

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