Perspectives on the Limits to Growth

Data Mining

Technology Long Waves

  

The Kondratiev Wave is an important element of World-Systems Theory. The graphic above is taken from Andreas Goldschmidt and gives historical specifics for technological cycles. Goldschmidt's formulation allows for the idea to be tested (one of the models I always test), is partially consistent with economic Growth theory (particularly if we do not assume a functional form for exogenous disembodied technological change in the Solow-Swan Model) and I can present some examples.

• The Iranian Economy prior to 1979 and associated Tech Bubble.

Again: Why Macroeconomic Models have Failed!

Almost two decades after the Financial Crisis of 2008, economists are still puzzling over why they failed to predict the Financial Crisis and what the failure of predictions has to do with the underlying economic models. The answer is simple but the solution, needless to say, isn't.

Economic Models are unable to predict systemic crises because they do not look at the Economy as a system but rather as a collection of individuals.

The System, as opposed to the individual participants, has its own rules and the rules have very little, if anything, to do with the rational economic behavior of individuals, even if all participants in the system behave rationally, which they certainly don't! The System can still produce optimum solutions, but that is also basically hypothetical.

All of this has been argued before (see the references in the Notes below), but we aren't making progress because we don't have examples of economic system models that can be estimated from historical data. I will provide examples in this post.

Researchers in Biology, Earth Sciences, and Engineering have basically solved the "Systems Problem," but the Social Sciences are still struggling with qualitative mental models that, even in mathematical versions, cannot be tested and refuted. There are great examples in Sociology (Parsonian Systems Theory), Political Science (Easton's Political Systems Model) and Economics (Classical Economic Models). 

Notes

 

How Does Systems Theory Differ from Economics?

 

 

The DCM is implemented in the public domain R Programming language as an extension to the dse (Dynamic System Estimation) package. The dse package can be downloaded on all Computer platforms and can be run on line with a web browser (here). The DCM extensions with documentation are available here.

In the dse package, a state space model can be created using the SS command in R:

The State Space model has two forms: non-innovations and innovations:

The matrices are (double click to enlarge):

An example of the USL20 model can be found here. Other examples of the models with written analysis can be found on my blog at Blogger.com (here). For more information on Dynamic Component Models see Pasdirtz, 2007.

Controlling Dynamic Components Models

 

For more information on Dynamic Component Models see Pasdirtz, 2007.

Feedback Controllers in the World-System: II

 

Feedback Controllers are used in Control Theory to generate positive and negative feedback loops to control systems. In economics and sociology, controllers can be generalized to describe the behavior of macro-economic and macro-social systems starting with Leibenstein's Malthusian Model:

• Malthusian Controller (Q-N) Negative feedback will result when population growth exceeds economic growth.
• Stock Adjustment (Q-K)
• Liberal Market Controller (Q-P) 
• Marxist Controller (Q-L) or (Q-wL) 
• Labor Surplus Controller (Q-LA) 
• Keynesian Controller (Q-G) 
• Environmental Controller (Q-T) 
• Mercantilism Controller (Q-X)
• Modernization Controller (N-V)
• World Price Controller (XR-X)
• Monetarism Controller  (Q-M)
• Fascism Controller (Q-War)
• Globalization Controller (WS-QP)
• Malthusian Trade Controller (N-X)
• Liberal Trade Controller (Q-X)
• Labor Surplus Controller (X-L)
• Class Struggle Controller (L-U)
• Urban Trade Controller (X-U)
• World-System Controller (WS-X)
• Ricardian Trade Controller (X-XWS)

In specific countries during specific historical periods, combinations of controllers are likely to be used. The used of a controller or multiple controllers does not imply that the systems is under stable control. For more discussion, see Growth and Control in the World-System. You can run the US_M model code and experiment with the model (here).