Modeling Dynamic Economic Systems

The frontiers of physical science and technology commanded attention dur­ ing the last two centuries. In the next century lies the frontier of better un­ derstanding of the behavior of social and economic systems. Ruth and Hannon join many other pioneers exploring this new frontier. By building on the profession of system dynamics, Ruth and Hannon con­ tribute to movement away from purely mental models, which necessarily lack adequate precision, toward more insightful and disciplined computer simulation models. The STELLA software used in this book is one of several computer applications created to implement the concepts of system dynam­ ics, a discipline that has been developed over the last 40 years and now ex­ tends into many fields of activity. System dynamics is beginning, even in kindergarten through 12th grade education, to provide a rigorous founda­ tion for dealing with dynamic change in mathematics, physics, social stud­ ies, environment, history, and even literature. Education at every level will be changing from teaching isolated facts to allowing students to explore those systems within which facts, policies, and individual relationships are embedded to develop their ability to think in terms of dynamic systems. This book includes elementary instruction in system dynamics modeling and in the STELLA software. It covers a wide range of material from simple building blocks of systems to models and mathematics of considerable complexity. The material opens many avenues for further exploration, re­ finement, and simplification.

Contenu

1 Introduction.- 1 Modeling Dynamic Systems.- 1.1 Model Building.- 1.2 Static, Comparative Static, and Dynamic Models.- 1.3 Model Components.- 1.4 Modeling in STELLA.- 1.5 Modeling Principles.- 1.6 Model Confirmation.- 1.7 Modeling of Natural Resource Use.- 1.8 Extending the Modeling Approach.- 2 Disaggregation of Stocks.- 2 Methods for Dynamic Modeling.- 3 System Boundaries in Space and Time.- 3.1 Introduction.- 3.2 Energy Cost of Production at the Level of the Firm.- 3.3 Extending the System Boundaries.- 3.4 Sensitivity Analysis.- 4 Scheduling Flows.- 4.1 Conveyors, Queues, and Ovens.- 4.2 Modeling Discrete Flows in Space and Time.- 4.3 Optimizing Traffic Flow.- 5 Positive Feedback in the Economy.- 6 Derivatives and Lags.- 6.1 Introduction.- 6.2 Derivatives and Lags: Some Applications.- 6.2.1 Single-Output Firm.- 6.2.2 Two-Output Firm.- 3 Microeconomic Models of Firms.- 7 Introduction to Modeling Economic Processes.- 8 Substitution of Inputs in Production.- 8.1 Trade-Off Possibility Frontiers.- 8.2 Profit Maximization with Several Inputs.- 9 Time Value.- 9.1 Current and Present Value Calculation.- 9.2 Cost-Benefit Analysis.- 10 Opportunity Cost.- 11 The Profit-Maximizing Competitive Firm.- 12 The Profit-Maximizing Monopoly.- 12.1 Introduction.- 12.2 Effects of Taxes on Monopolistic Output and Price.- 12.3 Monopolistic Production and Pollution.- 13 Monopolistic Collusion.- 14 Quasi-Competitive Equilibrium.- 14.1 Finding the Number of Profit-Maximizing Competitors.- 14.2 Use of MADONNA with STELLA.- 15 Modeling Economic Games.- 15.1 Arms Race.- 15.2 Barter Economy.- 15.3 Sealed-Bid, Second-Price Auction Game.- 4 Modeling Optimal Use of Nonrenewable Resources.- 16 Competitive Scarcity.- 16.1 Basic Model.- 16.2 Competitive Scarcity with Various DT.- 17 Competitive Scarcity with Substitution.- 17.1 Price Effects.- 17.2 Sudden Demand Shift.- 17.3 S-Shaped Substitution Model.- 18 Competitive Scarcity with Cost Dependent on Production Rate and Resource Size.- 19 Competitive Scarcity with Technical Change.- 20 Competitive Scarcity with Exploration.- 21 Monopoly Scarcity.- 22 Monopoly Scarcity with Variable Interest Rate.- 23 Monopoly Scarcity with Cost Dependent on Production Rate and Resource Size.- 5 Modeling Optimal Use of Renewable Resources.- 24 Optimal Timber Harvest.- 25 Managing Open Access Resources.- 26 Optimal Harvest from Fisheries.- 27 Predator-Prey Models of Fisheries.- 27.1 Basic Fisheries Model.- 27.2 Fishing with Nonmalleable Capital.- 28 Spatial Fishery Model.- 28.1 Basic Model.- 28.2 Management of a Multiregion Fishery.- 6 Chaos in Economic Models.- 29 Preference Cycles and Chaos.- 30 Nonmonotonic Demand and Supply Curves.- 31 Price Expectation and Production Lags.- 32 Chaos in Macroeconomic Models.- 7 Conclusions.- 33 Building a Modeling Community.- A1 Installation Instructions for Macintosh Version.- A2 Installation Instructions for Windows Version.- A3 Quick Help Guide.- A3.1 Overview of STELLA Operating Environment.- A3.2 Drawing an Inflow to a Stock.- A3.3 Drawing an Outflow from a Stock.- A3.4 Replacing a Cloud with a Stock.- A3.5 Bending Flow Pipes.- A3.6 Repositioning Flow Pipes.- A3.7 Reversing Direction of a Flow.- A3.8 Flow Define Dialog-Builtins.- A3.9 Moving Variable Names.- A3.10 Drawing Connectors.- A3.11 Defining Graphs and Tables.- A3.12 Dynamite Operations on Graphs and Tables.- MADONNA Quick Start.- B1 Installation of MADONNA `.- B2 Example: Harmonic Oscillator.- B2.1 Writing the Model Equations.- B2.2 Compiling the Model.- B2.3 Running the Model.- B2.4 The Graph Window.- B2.5 Multiple Runs.- References.