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My main research objec­tive is to devel­op qual­i­ta­tive­ly accu­rate mod­els of the econ­o­my’s behav­iour. These are not an attempt to repro­duce past eco­nom­ic data and make quan­ti­ta­tive pre­dic­tions for the future–which is the main pur­pose of most econo­met­ric work and some neo­clas­si­cal mod­ellers. The econ­o­my itself, and the mod­els I build of it, are com­plex (and affect­ed by behav­iour­al uncer­tain­ty) and it is there­fore high­ly unlike­ly that quan­ti­ta­tive pre­dic­tion will work.

This may change to some extent if and when more sophis­ti­cat­ed models–like those used by mete­o­rol­o­gists– are devel­oped (though they will still suf­fer from the impact of uncer­tain­ty).

But for the mean­time, I sim­ply want to cap­ture the boom and slump nature of the econ­o­my, and the ten­den­cy towards sec­u­lar accu­mu­la­tion of debt, plus where pos­si­ble the time pat­tern of actu­al eco­nom­ic data.

I do most of my work in what are known as Ordi­nary Dif­fer­en­tial Equa­tions (ODEs), and these are not the sort of thing that most blog read­ers would com­pre­hend; but for demon­stra­tion pur­pos­es, and some­times also for mod­el devel­op­ment, I imple­ment these mod­els in the graph­i­cal sim­u­la­tion pro­gram Vis­sim. This is one of many such pro­grams (the indus­try leader is Simulink by Mat­lab, oth­er com­peti­tors include Ven­sim and IThink; and there are sev­er­al free pro­grams as well, includ­ing the sys­tems com­po­nent of Net­L­o­go and the Sci­cos com­po­nent of Scliab). I pre­fer it because it is prob­a­bly the most graph­i­cal­ly-based of them all, and it has a free and very com­pact view­er pro­gram.

As I devel­op these mod­els, I will post them here. To down­load a mod­el right click on its link: a left-click will sim­ply load the text for the mod­el into your brows­er win­dow, since the mod­els are stored as text files by Vis­sim.

First cab off the rank is the mod­el that is the sub­ject of Debt­watch No 29 for Decem­ber 2008. It is a mod­el of Min­sky’s finan­cial insta­bil­i­ty hypoth­e­sis that includes Ponzi invest­ing:

Min­sky with Ponzi Invest­ing

Next the mod­el of endoge­nous mon­ey cre­ation that was the basis for the Rov­ing Cav­a­liers of Cred­it:

Endoge­nous Mon­ey Cre­ation and a Cred­it Crunch