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Title: The%20Seventh%20WAPE%20Forum%20State,%20Market,%20the%20Public%20and%20the%20Human%20Development%20in%20the%2021st%20Century%20May%2025%20-%2027,%202012%20Universidad%20Autonoma%20Metropolitana,%20Mexico%20City


1
The Seventh WAPE Forum State, Market, the Public
and the Human Development in the 21st Century
May 25 - 27, 2012 Universidad Autonoma
Metropolitana, Mexico City
  • Social Sciences
  • for the Support of a World of Solidarity
  • Peter Fleissner, Vienna, Austria
  • TU-Vienna, transform!at, http//transform.or.at

2
Outline
  • Introduction Socialism 21 from utopia to
    science gt towards a society of solidarity
  • A sketch of the theory of reflection
    (Widerspiegelungstheorie)
  • Simulation in the context of the cycle of change
  • Basic elements of mathematical models
  • Examples and classification of computer
    simulation
  • What to do?

3
Introduction (1/5)
  • Frederick Engels in Socialism Utopian and
    Scientific (The original title in German
    describes the relationship between Utopia and
    Science in a more precise way, it says from
    utopia to science)
  • (T)wo great discoveries, the materialistic
    conception of history and the revelation of the
    secret of capitalistic production through
    surplus-value, we owe to Marx. With these
    discoveries, Socialism became a science. The next
    thing was to work out all its details and
    relations.
  • On the other hand, Engels legacy The Dialectics
    of Nature offered essential features to
    posterity how to interpret natural sciences in
    the context of a materialistic perspective.
  • On the other hand, Marx and Engels showed in
    their writings how to analyze both, society and
    nature, in an integrated and dialectic way.

4
Introduction (2/5)
  • The materialistic concept of history, the
    mechanism of capitalistic production and the
    dialectics of nature still represent the basis of
    left scientific thought, allowing us deeper
    understanding of the fabrics of history and
    nature.
  • But History did not stop with Marx and Engels,
    nor did all kinds of sciences and research.
    History showed qualitative new features and
    relations and enriched our understanding of the
    world.
  • Therefore we should not use outdated and failed
    concepts of neither Socialism nor Nature.
  • We should not repeat the mistakes of the past. We
    have to apply the best methods, most efficient
    concepts, and the deepest insights human mind has
    discovered.
  • Also it is necessary that the new ideas are not
    only utopian, but are also scientific, based on
    the most developed insights available.

5
Introduction (3/5)
  • For a socialism of the 21st century imho four
    issues have to be taken into account
  • Concrete pathways towards the emancipation of
    labor (see the interview with Karl Marx in the
    Chicago Tribune, 5 January 1879) with a focus
    on ALL kinds of labor, may it be paid or unpaid,
    male or female, formal or informal, manual or
    mental.
  • Pathways towards socio-economic and
    gender-equality
  • Establishing a culture of democracy,
    participation, solidarity, recognition,
    inclusion, and conviviality.
  • Protecting natural environment, transforming
    production and its energy base towards
    sustainability.

6
Introduction (4/5)
  • We should not work with simplified solutions like
    to adopt outdated concepts of society, based on
    authoritarian rule, or destroying our social and
    natural environment. Marx demand for
    emancipation is not compatible with it.
  • Also, a change of our personal life style is
    needed, foremost in the wealthy countries of our
    planet, to be based on a changed mindset.
  • But one of the most important areas of change is
    still the politico-economic system. Although
    there is no ideal way towards a society of
    solidarity, there is definitely no hope to reach
    such goal without a political transformation of
    the economy.
  • In his paper Dynamic Modeling towards a Society
    of Solidarity at the WARP conference Carsten
    Stahmer described basic features of a new
    economic order in Germany. He proposed adequate
    methods and tools how to do research along these
    lines. I will elaborate on some of these methods.

7
Introduction (5/5)
  • One of the methods where great progress was
    reached is mathematical modeling and computer
    simulation.
  • My suggestion is to use this method as a tool to
    get a clearer and more consistent picture of the
    transformation process and the desired structure
    and dynamics of the economy of the future.
  • Of course, do not focus only on simulation! We
    have to apply it in close connection with other
    methods and tools of social sciences, political
    economics, mathematics and statistics in general.
  • In the following I illustrate where political
    economics and computer simulation can be located
    within the cycle of change, within a
    transformative and reflexive practice of changing
    society.
  • In my perspective, computer simulation is a
    special way of rule based reflection of specific
    structures and dynamics of the world.

8
Cycle of Change nature-society-nature
Reflection Portraying and Designing the world
the world
Diffusion
Reifying the concepts
Reification
Interaction
9
Economic Reality A Complex Construction
Contemporary Capitalism
market prices (observed)
7 6 5 4 3 2 1
commodification of information goods/services
Information Society information as commodity,
communication as commercial service
Public sector
taxes, subventions transfers, social insurance
Globalized economy International financial capital
markets for money, credit, stocks, derivatives
Capitalism with perfect competition and fixed
capital
prices of production labor market
Commodity production of self employed
exchange values prices labor values commodity/se
rvice markets
Physical basis
use values collective production/appropriation
10
Human beings as elements of the Cycle of Change
reflecting their practice (Widerspiegelung)
  • Reflection Portraying and Designing the
    world, based on human practice, striving for
    survival/a better life, in cooperation and/or in
    competition.
  • Human beings are embedded in the world and are
    part of it, but at the same time they are
    changing it according to their needs.
  • In changing their environment they they change
    also themselves.
  • Lenin metaphor for the brain camera portraying
    the world in a rather passive way. It is
    essential to stress also the active (design)
    part of the reflexion process Even the coat of
    the photographic paper will not map all the
    incoming electromagnetic waves, but selects
    certain frequencies and intensities of light.
    Only those selected leave their marks on the
    photo and are visible to other people. The same
    is true for a mirror (this is another analogy
    frequently used compare the German term
    Widerspiegelung).

11
Cycle of Change mathematical modeling included
Reflecting Portraying and Designing
the world
Diffusion
Reification
Reification
Reflection
12
Cycle of Change mathematical modeling included
  • Simulation models are
  • Based on human thinking and projection
  • In a social framework
  • Symbolic or physical reification/codification
  • Complementary to experiments
  • More than induction
  • More than deduction
  • More than reduction
  • Between theory and application
  • Types of simulation models
  • Econometric (based on emprical data)
  • Input-output (patterns of economic interaction)
  • Neural networks (highly nonlinear)
  • Systems dynamics models (world consists of stocks
    and flows)
  • Agent based models/microsimulation (macromicro
    levels)

13
Basic Relations in simulation models
  • Strictly deterministic relations
  • (inspired by Rainer Thiel Germany)
  • Definition equations
  • Static balance equations
  • Dynamic balance equations
  • Behavioral equations
  • Stochastic relations
  • (inspired by Herbert Hörz, Germany)
  • Randomness as residual/error
  • Randomness essential, but constant
  • Randomness essential, but variable

14
Mathemathic codification 0 Definition equations
  • Main element variable with an associated
    quality/dimension and a certain quantity
  • Types of definition equations
  • A A new variable of same dimension is
    constructed by other variables of the same
    dimension, but different quantities
  • Example Circumference of a triangle is equal to
    the sum of the length of the three sides.
  • B A new variable of new dimension is constructed
    by other variables of the same dimension, but
    different quantities
  • Example Area of a rectangle is the product of
    its length and width.
  • C A new variable of new dimension is constructed
    by other variables of the different dimension and
    different quantities. wir
  • Example Labour is force times distance, turnover
    equals unit price times volumes.
  • Although definition equations look simple, their
    identification was a cumbersome and erroneous
    process (like energy or force)

15
Mathemathic codification 1 Static Balance
Equation conservation laws e.g.
input-output-tables, national accounting schemes
L l1 l2 l3 l4
R r1 r2 r3
l3
Unequal quantities of equal qualities sum up to
a quantity of equal quality
l1
l2
l4
r1
r2
Only the unequal becomes equal Equal
quantities must consist of unequal qualities
r3
L R
16
Mathemathic codification 2 Dynamic Balance
Equationinventory equation, dynamic population
balance, capital accumulation, dynamic
accounting schemes
Dx(t, t1)
x(tDt) x(t) Dx(t, t1) The only qualitative
difference between left and right Position in
time reality is constructed by stocks and
flows Basis for the mirroring of dynamic
processes (difference and/or differential
equations)
x(t)
x(tDt)
t -gt t Dt
17
Mathemathic codification 3 Behavioral equations
cause-effect-schemes e.g. multi-variate
Blalock-model, econometric equations, neural
networks
x1
D
y(t) f x1(t), x2(t),
y
D
x2
  • Modifications
  • linear
  • nonlinear
  • stochastic
  • delays
  • Feedback -gt

D
18
Causal Loop Diagrams
Negative feedback goal seeking, oscillations (D)
Target value
State value
D
Positive feedback exponential growth
reaction
discrepancy
wages
Demand for higher wages
cost pressure
prices
19
ExamplesInput-Output-Model
Econometric model
D
D
20
Combined Example Input-Output and Econometric
ModelBMWF (Ed.) Mikroelektronik - Anwendungen,
Verbreitung und Auswirkungen am Beispiel
Österreichs, Wien 1981
21
Jay Forresters System Dynamics Basic
elements(Software Dynamo, Stella, Vensim )
Stella
Verhulst equation dx / x alfa (1 x ) dt
22
Forresters World Dynamics Causal Loops Diagram
23
Forresters World Dynamics (1971)
Dynamo-Diagramm
24
Forresters World Dynamics Stella Diagram
25
Mathematical Simulation ModelsParadigm Shifts
and Reification
Cybernetics 0. Order Cybernetics 1. Order Cybernetics 2. Order
linear nonlinear nonlinear
static dynamic dynamic
unidirectional feedback feedback
aggregated aggregated individuals (variable numbers of agents)
deterministic deterministic/non- essential randomness essential randomness/changing prob distributions
very abstract less abstract more realistic
26
Mathematical Simulation ModelsParadigm Shifts
and Reification
Cybernetics 0. Order Cybernetics 1. Order Cybernetics 2. Order
linear nonlinear nonlinear
static dynamic dynamic
unidirectional feedback feedback
aggregated aggregated individuals (variable numbers of agents)
deterministic deterministic/non- essential randomness essential randomness/changing prob distributions
very abstract less abstract more realistic
27
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
28
Equation y y e
Randomness in Regression Analysis
y(x)
e
y
y
x
29
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
30
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
y
forecast y deterministic part
31
Austrian Pension Schemes in Comparison
Private pension schemes
Demographic data and Sccial statistics
Amount of pension
Creation Of Individuals
Social Insurance Pension schemes
Amount/type of pension
Individual cases
HTML-files
32
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
y
forecast y deterministic part
33
Einsteins explanation of Brownian motion
  • The big particle can be considered as a dust
    particle while the smaller particles can be
    considered as molecules of a gas.
  • On the left is the view one would see through a
    microscope.
  • To the right is the supposed explanation for the
    jittering of the dust particle
  • http//galileoandeinstein.physics.virginia.edu/mor
    e_stuff/Applets/brownian/brownian.html

34
People leave a room
  • Leaving a room without panic velocity v0 1
    m/s.
  • Efficient because of good coordination
  • http//angel.elte.hu/panic/pedsim/sim/No_Panic.ht
    ml
  • Leaving a room with panic velocity v0 5 m/s.
  • Irregular and inefficient due to arching and
    clogging at the bottleneck (door)
  • http//angel.elte.hu/panic/pedsim/sim/Panic.html
  • Leaving a room with injured (Stampede)
    Verletzten velocity v0 5 m/s.
  • If a critical "squeezing" force of 1600N/m is
    exerted, a person is injured. (The squeezing
    force is measured as the sum of the magnitudes of
    radial forces acting on the pedestrian). Injured
    people block the exit.
  • http//angel.elte.hu/panic/pedsim/sim/Stampede_N0
    200_Fc1600.html
  • An asymmetrically placed column in front of the
    door can avoid injuries. http//angel.elte.hu/pan
    ic/pedsim/sim/Column_5.html

35
Overview of outcomes
Simulation 200 Persons Escaped before t45s Injured before t45s
No Panic No column, No injured 90 -
Panic No column, no injured 65 -
Stampede No column, Injured do not move 44 5
With column 72 0
36
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
.
y
forecast y deterministic part
37
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
.
y
forecast y deterministic part
38
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
.
.
y
forecast y deterministic part
39
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
y
forecast y deterministic part
40
How to treat Randomness? Zero Order Cybernetics
First Order Cybernetics Second Order
Cybernetics
Randomness essential Emergence of stable
structures by changing the properties of
randomness (prob. distr. variable)
Randomness non-essential Statistical laws of
nature (H. Hörz) In econometrics/ regression
analysis treated as residual or error term
No randomness
true y
true y
e residual stochastic part
.
y
forecast y deterministic part
41

agent based models
  • Example The blind and the lame
  • Two interacting worlds
  • world A physical world
  • (classical mechanics)
  • world B world of information and symbols
  • (words without meaning)

42
agent based models
  • and two interacting agents
  • agent 1 the blind
  • Is able to
  • jump
  • hear
  • Interpret sound he/she hears
  • And act accordingly (jump)
  • agent 2 the lame
  • Is able to
  • See the width of the obstacle
  • Produce sound (with a trumpet)
  • Can link the width of the obstacle to the pitch
    of the sound

http//members.chello.at/gre/springer/
43
An invitation to cooperation
  • We should start a global network of scholars
  • accompanying political processes of change
    towards new forms of socialism of the 21st
    century
  • by adequate mathematic modeling tools,
  • also taking advantage from already existing
    groups or activities (see e.g. GINFORS, an
    Anglo-German Foundation research policy
    initiative Creating sustainable growth in
    Europe, http//www.agf.org.uk/currentprogramme/Cre
    atingSustainableGrowthInEurope.php).
  • starting with parallel work on a national basis,
  • later on combining national models to regional,
  • finally global ones.

44
Tentative research agenda (1/3)
  • Collecting existing ideas of types of socialism
    of 21st century.
  • I do not believe in a unique model of socialism,
    although various features have to be in common.
    Each country has its own history, tradition and
    institutions of social decision making and
    co-operative forms. Nevertheless it would be
    useful to have a kind of standardized description
    of each model type, and also a list of pros and
    cons to make comparisons and evaluation easier.
  • Collecting existing transition concepts towards
    socialism - in particular, if they are
    controversial -, elaborating, investigating and
    comparing them within specialized satellite
    research groups, maybe linked to existing
    research units or research projects.

45
Tentative research agenda (2/3)
  • Examples of controversial or open questions resp.
    ill defined areas of research
  • Commodity markets vs. moneyless transfer methods
  • Redistribution process minimum wage vs. basic
    income - in money terms or in kind
  • Working time regimes and remuneration concepts
    for simple and complex labor
  • Price structures guided by labor values, prices
    of production or other community targeted
    pricing?
  • How to preserve the natural environment and
    transform the carbon based production towards a
    more sustainable system?
  • How to design and organize political
    participation and democratic control?

46
Tentative research agenda (3/3)
  • Identifying adequate software tools and creating
    a pool of platforms for free use/open source
    (e.g. VENSIM, NETLOGO, FABLES, PAJEK). Probably
    the methods should include system dynamics, agent
    based and network types of modeling.
  • Developing national simulation models of
    socialism in each of the countries, documenting
    them in a standardized way, making the simulation
    models available to other researchers for testing
    and improving. If applicable the simulation
    models should be updated according to progress in
    implementation of socialist features in the
    individual countries.
  • Collecting models, comparing and trying to
    integrate them.
  • Feeding the results back to the actual political
    process in various countries, updating the model
    structure according to practical experiences in
    the concrete socialist implementation process.

47
Institutional context (proposal)
  • Discussions and meetings in real life could be
    organized by the World Advanced Research Project
    (WARP) and the Center for Transition Sciences
    (CTS).
  • The annual World Conferences on Political Economy
    (WAPE) could be a suitable forum for discussion
    and support of these activities.
  • The network could become a global platform of
    elaboration, discussion and exchange of concepts,
    methods and models of economies in transition
    towards a society of solidarity, the socialism of
    21st century.

48
Thanks for your attention!Contactfleissner_at_arr
akis.es
49
Economic Reality A Complex Construction
Contemporary Capitalism
market prices (observed)
7 6 5 4 3 2 1
commodification of information goods/services
Information Society information as commodity,
communication as commercial service
Public sector
taxes, subventions transfers, social insurance
Globalized economy International financial capital
markets for money, credit, stocks, derivatives
Capitalism with perfect competition and fixed
capital
prices of production labor market
Commodity production of self employed
exchange values prices labor values commodity/se
rvice markets
Physical basis
use values collective production/appropriation
50
Layer 1 Use values, collectively produced and
appropriated
  • Mathematical description in terms of Leontiefs
    input-output scheme to represent the economy in
    terms of use values.
  • Each row and each column represent one branch of
    production or firm
  • It reflects the degree of division of labor.
  • The matrix of technical coefficients A represents
    the technology of the economy. The element aij
    gives the amount of goods of industry i needed to
    produce one unit of output of industry j.
  •  
  • x (output vector) contains all use values
    produced. It can be split by kind of use of goods
    into Ax (demand for intermediate goods) and y
    (final demand). The following famous formula is
    called the primal problem 
  • Ax y x
  • y (final demand) can be split it into c
    (consumption) and s (surplus product capital
    investment)
  • y c s.
  • or in matrix notation 
  • Ax Cx Sx x ,
  • where C, and S represent matrices of consumption
    coefficients and surplus coefficients
    respectively.

51
Layer 2 Labour values, small commodity
production
  • The dual Leontief model deals with the unit
    prices
  • pA q p
  • p row vector of unit prices q unit value
    added.
  • After substitution of q by life unit labor input
    l we get the basic formula how to compute Marx
    labor values v
  •  vA l v.
  • We can split l into wages, w, and profits p and
    get
  • l w p.
  •  Marx used different symbols
  •  W C V M,
  •  where W is the labor value,
  • C constant capital,
  • V variable capital and
  • M surplus value.
  • In our notation
  • v vA w p.

52
Structure of classical labour values all
industries are value producers c - constant
capital, v - variable capital, m - surplus
valueAustria 2003 57 industries (percent), r
0.883
m
v
c
53
Nr Industry
1 Agriculture, hunting
2 Forestry, logging
3 Fishing, fish farms
4 Mining of coal and lignite
5 Extract. o. crude petrol. a. nat. gas, min. o. metal ores
6 Other mining and quarrying
7 Manufacture of food products and beverages
8 Manufacture of tobacco products
9 Manufacture of textiles
10 Manufacture of wearing apparel
11 Manufacture of leather, leather products, footwear
12 Manufacture of wood and of products of wood
13 Manufacture of paper and paper products
14 Publishing, printing and reproduction
15 Manufacture of coke, refined petroleum products
16 Manufacture of chemicals and chemical products
17 Manufacture of rubber and plastic products
18 Manufacture of other non-metallic mineral products
19 Manufacture of basic metals
20 Manufacture of fabricated metal products
21 Manufacture of machinery and equipment n.e.c.
22 Manufacture of office machinery and computers
23 Manufacture of electrical machinery and apparatus n.e.c.
24 Manufacture of radio, television equipment
25 Manuf. of medical, precision, optical instruments, clocks
26 Manufacture of motor vehicles and trailers
27 Manufacture of other transport equipment
28 Manufacture of furniture manufacturing n.e.c.
29 Recycling
30 Electricity, gas, steam and hot water supply
31 Collection, purification and distribution of water
32 Construction
33 Sale and repair of motor vehicles automotive fuel
34 Wholesale and commission trade
35 Retail trade, repair of household goods
36 Hotels and restaurants
37 Land transport transport via pipelines
38 Water transport
39 Air transport
40 Supporting a. auxiliary transport activities travel agencies
41 Post and tele-communications
42 Financial intermediation, except insur.
43 Insurance and pension funding, except social security
44 Activities auxiliary to financial intermediation
45 Real estate activities
46 Renting of machinery and equipment without operator
47 Computer and related activities
48 Research and development
49 Other business activities
50 Public administration compulsory social security
51 Education
52 Health and social work
53 Sewage and refuse disposal,sanitation and similar act.
54 Activities of membership organizations n.e.c.
55 Recreational, cultural and sporting activities
56 Other service activities
57 Private households with employed persons
54
Stucture of labour values no surplus of
services, variable exploitation rates c -
constant capital, v - variable capital, m -
surplus valueAustria 2003 57 industries
(percent)
m
m
v
v
c
c
55
Layer 3 prices of production, capitalist economy
at perfect competition
Capital Investment
Production
Consumption
Labor
workers
capitalists
Commodities Services
Wages
Profits
56
Layer 3 prices of production, capitalist economy
at perfect competition
Marx provided us with the following solution for
p  p v (K C) (1 r), where r v (I - A -
C) x / v (K C) x and v l (I A)-1 Kmatrix
of capital coefficients per unit of output, I
identity matrix with ones in its main diagonal,
otherwise zeros, and r is the average rate of
profit.   This method can be generalized to an
iteration process which leads us to the solution
proposed by von Bortkiewicz in the beginning of
the 20th century (which is equal to the solution
of an eigenvector/eigenvalue problem). The
generalized iteration scheme inspired by Marx
is  pi (K C) (1 ri) pi1 where ri pi (I
- A - C) x / pi (K C) x,  ri average profit
rate at iteration step i. (Different turnover
times neglected,and assume they are all equal to
one.   The link to labor time is kept up because
the iteration scheme starts from the solution of
equation (3) for v   p0 v l (I A)-1, where
r0 p0 (I - A - C) x / p0 (K C) x  
57
Marx solution Prices of productionc - constant
capital, v - variable capital, m - surplus
valueAustria 2003 57 industries (percent),
r0.901
m
v
c
58
von Bortkiewicz Prices of productionc -
constant capital, v - variable capital, m -
surplus valueAustria 2003 57 industries
(percent), r0.952
m
v
c
59
Layer 3 prices of production, capitalist economy
at perfect competition
Marx provided us with the following solution for
p  p v (K C) (1 r), where r v (I - A -
C) x / v (K C) x and v l (I A)-1 Kmatrix
of capital coefficients per unit of output, I
identity matrix with ones in its main diagonal,
otherwise zeros, and r is the average rate of
profit.   This method can be generalized to an
iteration process which leads us to the solution
proposed by von Bortkiewicz in the beginning of
the 20th century (which is equal to the solution
of an eigenvector/eigenvalue problem). The
generalized iteration scheme inspired by Marx
is  pi (K C) (1 ri) pi1 where ri pi
(I - A - C) x / pi (K C) x,  ri average
profit rate at iteration step i. (Different
turnover times neglected,and assume they are all
equal to one).   The link to labor time is kept
up because the iteration scheme starts from the
solution of equation (3) for v  p0 v l (I
A)-1, where r0 p0 (I - A - C) x / p0 (K C) x  
60
Layer 4 Real capital, financial capital
Capital Investment
Production
Consumption
Labor
workers
capitalists
Commodities Services
Wages
Profits
credits
credits
Financial capital
financial earnings
financial earnings
61
Layer 4 Real capital, financial capital
  • In Layer3 the following equilibrium conditions
    were assumed
  • Wages equal consumption wx pCx pc
  •  Profits equal capital investment px pSx ps.
  • If we want to reflect money explicitly in the
    economy, we need to get rid of such equilibria.
    Therefore we replace them by the following
    savings equations
  • Money savings/increase of debt of households, shh
    , are given by the following relations
  • shh,t w t 1C t rl ,t mhh,t if mhh,t gt 0
  • shh,t w t 1C t rb,t mhh,t if mhh,t lt 0
  • mmoney stocks, rl interest rate for lending
    money to banks, rb interest rate for borrowing,
    rl lt rb
  • Similarly, we have money savings/increase of debt
    of firms, sf , as a result of profits, minus
    capital investment and borrowing/lending money
    (time indices suppressed)
  • sf p 1S rl mf if mf gt 0
  • sf p 1S rb mf if mf lt 0

62
Layer 4 Real capital, financial capital
  • The financial assets/debts of firms, households
    and state are held by the banks. Assets are
    rewarded by banks with an interest rate
    r_borrowing, credits have to be paid for with an
    interest rate r_lending (r_lending gt
    r_borrowing). The payments of interest are
    deducted from / added to the surplus variables or
    wage income. Of course, the redistribution does
    not change the amount of total GDP.
  •  
  • In this simplified version the income of banks is
    given by the sum of all interest payments of all
    sectors including the household and government
    sectors minus all interest payments of the bank
    for deposits of firms, households of government
    (if any)
  •  
  • -rl mhh. (if mhh. gt 0) -rl mf. (if
    mf. gt 0)
  • xbanks S.
  • -rb mhh. (if mhh. lt 0) -rb mf. (if mf. gt 0)
  • Including a financial sector creates a secondary
    distribution of income.

63
Layer 4 Real capital, financial capitalDynamic
equations
  • The dynamics for physical capital is given by
  • K a,t1 K a,t Sn K a,t (S - Sd),
  • where Sn is the matrix of net capital investment
    per time unit, and Sd the scrap matrix (or
    depreciation matrix) of capital. The relation
    between gross and net investment is given by
  • Sn S - Sd
  • The money capital stock of firms, banks and the
    government debt can be represented by a row
    vector mf,t , the one of households by mhh,t
  • Money()/Debt(-) stocks of households, mhh,t , at
    time t, is given by
  • mhh,t1 mhh,t shh,t
  • Money()/Debt(-) stocks of firms, mf,t, at time
    t
  • mf,t1 mhh,t sf,t

64
Layer 5 Real capital, financial capital, public
sector
Taxes subsidies
Taxes transfers
Public sector
65
Layer 5 Real capital, financial capital, public
sector
  • For a simplified mathematical model one could
    include the following variables to represent
    activities of the state
  • t_ind tax rate of indirect taxes
  • t_profits tax rate of profits
  • t_wages tax rate on wages
  • indirect taxes
  • direct taxes (wage tax, profit tax)
  • public consumption
  • public investment
  • contributions to the social insurance system
  • transfers to households
  • subsidies to enterprises
  • Including a public sector creates a tertiary
    distribution of income

66
Layer 6 Information society Commodification
and Commercialization of cultural activities
  • As already has happened in history with land and
    work, under the headline of information society
    the market conquers the sector of cultural
    activities, writing, singing, dancing, chatting,
    performing any kind of arts, doing research etc.
  • This is done by an efficient interaction of the
    economy, technology and law.
  • Technology allows for freezing volatile
    information on a carrier of digital or analogue
    data and also reviving it. It transforms cultural
    activies into information goods, knowledge goods
    and cultural goods.
  • By Law (e.g. Intellectual Property Rights)
    copying is forbidden. Therefore all properties of
    commodities are created and they can be exploited
    by private capital.
  • Three kinds of markets have been established
  • A market of data carriers with content (CDs,
    DVDs, tapes etc)
  • A market of communication services (mobile
    communication, Internet)
  • A market of devices (PCs, Laptops, TV-sets etc)

67
Economic Reality A Complex Construction
Contemporary Capitalism
market prices (observed)
7 6 5 4 3 2 1
commodification of information goods/services
Information Society information as commodity,
communication as commercial service
Public sector
taxes, subventions transfers, social insurance
Globalized economy International financial capital
markets for money, credit, stocks, derivatives
Capitalism with perfect competition and fixed
capital
prices of production labor market
Commodity production of self employed
exchange values prices labor values commodity/se
rvice markets
Physical basis
use values collective production/appropriation
68
Layer 7 Contemporary capitalism
  • To approximate the system of contemporary
    capitalism, a dynamic input output model on
    stylized facts was constructed on two JAVA-based
    simulation platforms ANYLOGIC (proprietary) and
    FABLES (free of charge). As a next step the
    model will be filled with actual data.
  • The following control variables allow for a
    change of the distribution of value added
  • r_b interest rate for credits
  • r_l interest rate for assets at banks
  • t_ind tax rate of indirect taxes
  • t_profits tax rate of profits
  • t_wages tax rate on wages
  • deprec_rate depreciation rate (for the moment
    related to output, not to fixed capital).
  • leverage_factor limits the maximum amount of
    credits given by banks with respect to their
    financial assets.
  • fraction of public investment on total investment

69
Output, savings, prices of six sectors of the
economy and savings of households (preliminary
results)
70
Capital stock and money/debt stock of each of the
six sectors of the economy and of households
(preliminary results)
71
  • Thanks for your attention
  • Contact
  • fleissner_at_arrakis.es
  • http//transform.or.at

72
Wassily W. Leontief, Scientific American,
Sept.1982, pp.152-164
Nobelpreis für Ökonomie1973
73
10-years forecast/comparison with actual data
1990 fast diffusion of micro-electronics in
Austria
Indikator 1990 actual 1990 standard 1990 forecast with m-electronics
GDP prices 1976 1051 Mrd ATS 1113 Mrd ATS 1190 Mrd ATS
unemployed 165.795 220.000 386.000!
Wage labour 2.925.396 3.221.000 3.056.000
male 1.716.754 1.883.000 1.802.000
female 1.208.642 1.338.000 1.254.000
Working hours Hours/week 39,4 39,6 39,9
Exports 526 Bill ATS 619 Bill ATS 624! Bill ATS
Imports 470 Bill ATS 631 Bill ATS 648! Bill ATS
74
Transitiondiagram
  • Status 0 neither employed not retired
  • Status 1 blue collar
  • Status 2 white collar
  • Status 11 blue collar ret by invalidity
  • Status 12 blue collar ret by age
  • Status 21 white collar ret by invalidity
  • Status 22 white collar ret by age

dead
abroad
birth
75
Total Population Austria 2003-2050
Yellow line life expectancy up to 90 yrs by 2050
76
Retirement Age(Invalidity) White Collar Workers,
male
77
A Combined System Dynamics/Econometric
ModelG. Bruckmann/P. Fleissner Controlling
the National Economy (Am Steuerrad der
Wirtschaft)Springer 1989
Interactive Simulation
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