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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

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?

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.

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 - Therefore we should not use outdated and failed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.

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.

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.

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.

Cycle of Change nature-society-nature

Reflection Portraying and Designing the world

the world

Diffusion

Reifying the concepts

Reification

Interaction

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

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).

Cycle of Change mathematical modeling included

Reflecting Portraying and Designing

the world

Diffusion

Reification

Reification

Reflection

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)

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

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)

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

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

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

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

ExamplesInput-Output-Model

Econometric model

D

D

Combined Example Input-Output and Econometric

ModelBMWF (Ed.) Mikroelektronik - Anwendungen,

Verbreitung und Auswirkungen am Beispiel

Österreichs, Wien 1981

Jay Forresters System Dynamics Basic

elements(Software Dynamo, Stella, Vensim )

Stella

Verhulst equation dx / x alfa (1 x ) dt

Forresters World Dynamics Causal Loops Diagram

Forresters World Dynamics (1971)

Dynamo-Diagramm

Forresters World Dynamics Stella Diagram

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

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

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

Equation y y e

Randomness in Regression Analysis

y(x)

e

y

y

x

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

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

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

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

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

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

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

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

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

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

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

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

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)

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/

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.

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.

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?

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.

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.

Thanks for your attention!Contactfleissner_at_arr

akis.es

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

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.

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.

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

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

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

Layer 3 prices of production, capitalist economy

at perfect competition

Capital Investment

Production

Consumption

Labor

workers

capitalists

Commodities Services

Wages

Profits

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

Marx solution Prices of productionc - constant

capital, v - variable capital, m - surplus

valueAustria 2003 57 industries (percent),

r0.901

m

v

c

von Bortkiewicz Prices of productionc -

constant capital, v - variable capital, m -

surplus valueAustria 2003 57 industries

(percent), r0.952

m

v

c

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

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

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

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.

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

Layer 5 Real capital, financial capital, public

sector

Taxes subsidies

Taxes transfers

Public sector

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

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)

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

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

Output, savings, prices of six sectors of the

economy and savings of households (preliminary

results)

Capital stock and money/debt stock of each of the

six sectors of the economy and of households

(preliminary results)

- Thanks for your attention
- Contact
- fleissner_at_arrakis.es
- http//transform.or.at

Wassily W. Leontief, Scientific American,

Sept.1982, pp.152-164

Nobelpreis für Ökonomie1973

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

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

Total Population Austria 2003-2050

Yellow line life expectancy up to 90 yrs by 2050

Retirement Age(Invalidity) White Collar Workers,

male

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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