Lecture 8: Introduction to dynamic modeling. (Slides: CfESI Subscribers Part 1; Part 2; Debtwatch Subscribers Part 1 Part 2)
Explaining the “Monetary Circuit Theory” of capitalism. I show that the dilemmas that hobbled Circuit Theory for so long were simple mistakes in dynamic modelling, which reflect poorly not so much on Circuit theorists themselves, but economists in general, since even non-orthodox economists are locked into the static ways of thinking they were taught by neoclassical lecturers. This lecture gives a very brief introduction to the basic elements of dynamic modeling–differential equations and systems engineering–and begins explaining QED, the prototype monetary dynamic modeling tool developed by blog member Sirius.
I extend the model developed in the first half of the lecture to include payment of wages and consumption. The resulting model “works” in that it is possible for capitalists to borrow money, produce output, and make a profit. Just under 30 minutes in to the lecture, I start developing the model using QED live. (QED Demo files–free download)