Tuesday, August 28, 2012

An interactive growth model

Earlier this year I wrote a Mathematica model to demonstrate some of the fallacies of neo-classical models of economic growth.  For some reason the fact that the basic models did not result in growth when time equals infinity, was cause for alarm.  New models that grew for infinite time must be found.

I argued that perhaps we don't yet have the evidence to dismiss models that show diminishing growth over time.  At least it doesn't feel like I am at the end of time yet.

So I wanted to have a closer look at what sort of rates of growth we could expect, and for how long they persist, with reasonable parameters for models with diminishing returns.

This post is simply to test whether I can embed the interactive results of one of my early models into a blog (and after 9 attempts, the answer is yes).

The basic gist of the model is that it growth is dependent on capital, but with diminishing returns (alpha is less than 1).  Economies with higher investment ratios will have higher growth in the long run, but less consumption in the short run.

The market/institution multiplier is just a way of adjusting the resulting output from a given level of capital.  It is designed to represent the governance and institutions that allow more efficient use of capital.

And the technology parameter is meant to represent new methods of production.

For now, I am just glad I finally have it working on the blog.

1 comment:

  1. This comment has been removed by a blog administrator.

    ReplyDelete