MacroDynamics Book
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Working Outline of Macroeconomic Dynamics

 

 

Selected Economic Thinkers from Adam Smith to the Present Day

This figure is adapted from Radzicki, Michael J. 2003. "Mr. Hamilton, Mr. Forrester, and a Foundation for Evolutionary Economics." Journal of Economic Issues 37(1): 135.

Abstract

This book is a written version of my graduate course on macroeconomic dynamics. It presents a collection of well-known economic models, from Adam Smith to the present day Post Keynesian and institutional economists, that have been translated into a system dynamics format. These models include written (non-mathematical) models, static models, difference equation models, and differential equation models. Whenever possible, the notation and nomenclature of the models have been kept the same so that the reader can clearly see the evolution of the ideas of some of the great economic thinkers from the last three centuries. The book concludes with an overview of the Post Keynesian-Institutionalist-System Dynamics "core" model, which is an example of how a "proper" system dynamics macroeconomics model (i.e., one that follows the original system dynamics paradigm) is created from scratch.

Chapter 1: What is Economics?

  1. Orthodox View

  2. Heterodox View

Chapter 2: What is "Economic Dynamics"?

  1. Statics versus Dynamics & Samuelson's Correspondence Principle

  2. Continuous versus Discrete Simulation

  3. Linear versus Nonlinear Models

  4. Simulated versus Analytical Solutions

  5. Continuous Time Models

  6. Discrete Event Models

  7. Translating Difference Equation Models into their Equivalent System Dynamics Representation

  8. Translating Differential Equation Models into their Equivalent System Dynamics Representation

Chapter 3: Macroeconomic Dynamics Versus Microeconomic Dynamics

  1. Traditional Cobweb Model

  2. Meadows' Commodity Production Model

Chapter 4: Macroeconomic Measurements - The National Income & Product Accounts

  1. NIPA

  2. Problems with NIPA

  3. Alternative to NIPA

Chapter 5: Macroeconomic Measurements - Stylized Facts, PAIN & Misery

  1. Stylized Facts Concerning the Trend

  2. Stylized Facts Concerning the Cycle
    * Leading, Lagging & Coincident Indicators

  3. Other Macroeconomic Measurements
    * Measuring Inflation & Unemployment
    * PAIN & Misery Indices

Chapter 6: The Magnificent Dynamics of the Classical Economists

  1. Who are the Classical Economists & what did they Believe?

  2. Harris Composite Model

Chapter 7: Evolutionary Economics, Creative Destruction & Long Waves

  1. Marx Model

  2. Schumpeter Model

  3. Goodwin's Keynes, Marx, Schumpeter Model

  4. Sterman's Behavioral Model of the Economic Long Wave

Chapter 8: Pre-Keynesian Views of the Great Depression

  1. Say-Marshall-Pigou Composite Model

Chapter 9: Orthodox Keynesian Economics & the General Theory

  1. Keynesian Cross, IS-LM, & the Orthodox Keynesian Family of Models

Chapter 10: Generalizing the General Theory - Harrod & the Start of Modern Growth Theory

  1. Production Functions

  2. Positive Feedback, Increasing Returns, Circular & Cumulative Causation, & Exponential Growth

  3. Harrod Model

  4. Domar Model

Chapter 11: The Cambridge (Heterodox) Solution to Harrod's Problems

  1. Kaldor Model

  2. Pasinetti Model

Chapter 12: The Neoclassical (Orthodox) Solution to Harrod's Problems

  1. The Cobb-Douglas and CES Production Functions

  2. Solow/Swan Model

Chapter 13: Cyclical Attempts to Extend the Harrod Model & Solve Harrod's Second Problem

  1. Why Systems Oscillate

  2. Linear (Shock Dependent) Models of the Trade Cycle
    * Hicks' Linear Multiplier-Accelerator Model
    * Low's Version of Hicks' Linear Multiplier-Accelerator Model (A Correction to the Correction)
    * Phillips' Multiplier-Accelerator Model (Apparently Low Didn't Think of it First)
    * Kalecki's 1933-35 Model of the Trade Cycle
    * Metzler's Model of Inventory Cycles

  3. Non-Linear (Shock Independent) Models of the Trade Cycle
    * Hicks' Non-Linear Model of the Trade Cycle
    * Kaldor's Non-Linear Model of the Trade Cycle
    * Foley's Version of Kaldor's Non-Linear Model of the Trade Cycle
    * Goodwin's Simple Non-Linear Model of the Trade Cycle
    * Goodwin's Advanced Non-Linear Model of the Trade CycleS

  4. Chaos, Complexity & Non-Ergodic Systems
    * Chaos in Hicks' Non-Linear Model of the Trade Cycle
    * Chaos in Bhaduri &  Harris' Model of Ricardian Dynamics

Chapter 14: Interactions Between the Trend & the Cycle - More Attempts to Address Harrod's Second Problem

  1. Hicks' Model of Cyclical Growth with an Exogenous Trend

  2. Hicks' Model of Cyclical Growth with Ratchet Effects

  3. Keen's Revision of Hicks' Linear Multiplier-Accelerator Model (Another Correction to the Correction)

  4. Radzicki's Version of the Harrod Model with Bounded Rational Expectations (An Alternative Approach)

  5. Lotka-Volterra & Goodwin's Model of Class Conflict

Chapter 15: Fitting Macroeconomic Dynamic Models to Data & the Issue of Model Validity

  1. Reference Modes

  2. Techniques for fitting System Dynamics Models to Numerical Data & Estimating their Parameters

  3. Fitting the Harrod, Pasinetti and Solow Models to Macroeconomic Data

  4. Model Validity & Building Confidence in System Dynamics Models

Chapter 16: Adding Money to the Mix - Can "It" Happen Again?

  1. Tobin's Version of the Solow Model with Money

  2. Keen's Minsky Model

Chapter 17: Adding Technological Change to the Mix

  1. Types of Technological Change
    * Harrod Neutral
    * Hicks Neutral
    * Solow Neutral
    * Capital Vintaging
    * Learning-By-Doing
    * Endogenous

  2. Models
    * Harrod Model with Technological Change
    * Solow/Swan Model with Technological Change
    * Arrow-Like Model of Learning-By-Doing
    * Radzicki-Sterman Learning Curve Model
    * Romer's Model of Endogenous Growth Through Ideas

Chapter 18: Adding the Environment to the Mix: Sustainable Economic Development

  1. Ramsey Model

  2. The Golden Rule of Accumulation in Solovia

  3. Daly's Optimal Macro Size

  4. Forrester's WORLD2 Model With & Without Technological Progress
    * The Orthodox Critique

  5. Sustainable Cities & Urban Dynamics

Chapter 19: The Cambridge Controversies

  1. Sraffa's Production of Commodities by Means of Commodities

  2. Robinson's Aggregate Production Function

  3. Shaikh's Humbug Production Function

Chapter 20: The Post Keynesian-Institutionaist-System Dynamics Core Model

  1. The Fundamentals of Institutional Economics

  2. The Fundamentals of Post Keynesian Economics

  3. Functional Finance

  4. Chartalism

  5. Endogenous Money

  6. Employer of Last Resort Programs