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November 23, 2008

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Nato

Fascinating. This is the sort of dynamic systems analysis that is really the next frontier.

Nato

Did you/have you thought about limiting the amount of change possible to each agent in each turn, to represent the real-world difficulty of hiring (and the commensurate reluctance for lay-offs), the amount of time it takes to secure loans, locate alternate facilities, renegotiate contracts and so on?

Nathan Smith

Actually, I just saw the "recessions" yesterday, so I haven't thought about the implications much yet. I wanted to use the "circular flow" economy as a platform for analyzing productivity growth dynamics at the firm level, and for the moment, since this is for a paper that is due end-of-semester, that's my priority. But it would certainly be interesting to take a closer look at the parameters of the model and see what variables drive what in the business cycle. There's a lot more that can be explored here...

The simulation is quite simple (primitive, crude) at this point; some of your questions imply a greater degree of micro sophistication than is present here. There's no capital, it's a labor-only production technology, so "locating alternate facilities" is not a problem. There are no loans either: this is an economy of sole proprietorships who finance themselves out of savings. I have a plan to add capital markets, though probably one based on equity rather than credit, but I haven't done so yet. There's no renegotiation of contracts: this is a day-labor economy, and no agent works for the same boss twice except by coincidence. Agents don't "remember" their previous bosses, nor bosses their previous employees. Which is OK since all jobs are the same except for the wage-- there is only one consumption good and no specialization of labor. Also there are no principal-agent problems: everyone fulfills their agreements exactly. I think I'll stick with the unrealistic assumption of perfect contracts for a while, since I want to explain economic growth, and I don't think fraud is a driver of economic growth, though it might be a factor slowing it down. I also want to add capital goods, though my priority is to introduce Austrian-style intermediate ("higher-order") goods that are consumed in use, before trying to deal with durable (multi-use) capital goods. So, many plans. And all that was before I noticed the "recessions." We'll see...

UK dissertations

Blogs are so interactive where we get lots o informative on any topics nice job keep it up !!

herbert

Hi! I just came across this. I'm wondering if you have any papers related to or any form of documentations of the model you mentioned here? If so, would you please send me via email? I'm interested in knowing more about your methodology. Thanks.

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