Re: [OPE-L] the point of a dynamic model?

From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Mon Mar 19 2007 - 10:20:19 EDT

> My experience from simulation was precisely that the models where
> much less stable than real existing capitalism, because everybody
> reacted (herd behavior) to the same price signals, but the
> heterogeneity of firms, the different/conflicting strategies makes
> the system more stable.

Hi Anders:

How did you *test* what the causes of  relative stability were and how
important was each?

(Re 'herd behavior'):
There are, as you know, many different  types of  dynamic models.
Which one did you use it and why did you chose it over other dynamic
model types?


The questions I have (in answer to another question of yours) include:
--  whether you can plug in all of the relevant variables into the model of
       the trade cycle and produce economically meaningful results;
--  whether the  reality that the model seeks to describe  is
      overdetermined and can't  be captured in a formal model.

Here are a few more of those variables (to be added to the ones I listed

--  change in the size of the working population;
--  changes in the value of labor power;
--  changes in productivity;
--  changes in the hours of work;
--  changes in the rate of  productive (v. unproductive) consumption of s;
--   to what extent the commodities being purchased by workers and  other
        classes are being produced abroad;
--   presence of obstacles to the mobility of labor power;
--   the extent to which there is oligopolistic pricing and which class or
       classes pays the rent;
--  the effect of  the petty commodity ('informal') sector and the
       'underground economy' on the economy  including the VLP and the
       non-labor costs of production of firms;
--  changes in the debt burden of workers and others;
--  changes in expectations on the part of all classes (which can affect the
        timing of  savings, consumption, and investment);
--  changes in the composition of demand;
--  'long cycles',  including the timing of investments in constant fixed
       capital including
--   the turnover time of fixed capital;
--  changes in the foreign exchange rate;
--  state policies on trade;
--  the effects of international working class struggles,
--  changes in health care costs, life expectancy, pensions, etc. (all of
        which can affect the VLP),
--  the effects of  regional trade associations (e.g. membership in the EU)
       on everything else, etc.

It would be very easy to add to this list, would it not?

In any event, the best cure for my skepticism (which arose in response to
the  exaggerated claims by other Marxians about what dynamic models
could be used to show) is to go ahead and produce a  meaningful dynamic
model of  any actually existing capitalist economy which includes all of
the relevant variables and to explain the choices which were made in the
selection and specification of that model.

In solidarity, Jerry

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