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Modeling economic forces, power relations, and stock-flow consistency: a general constrained dynamics approach

Author

Listed:
  • Oliver Richters

    (University of Oldenburg, Department of Economics)

  • Erhard Gloetzl

    (Institute for the Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria;)

Abstract

In monetary Stock-Flow Consistent (SFC) models, accounting identities reduce the number of behavioral functions to avoid an overdetermined system of equations. We relax this restriction using a differentialalgebraic equation framework of constrained dynamics. Agents exert forces on the variables according to their desire, for instance to gradually improve their utility. The parameter ‘economic power’ corresponds to their ability to assert their interest. In analogy to Lagrangian mechanics, system constraints generate additional constraint forces that lead to unintended dynamics. We exemplify the procedure using a simple SFC model and reveal its implicit assumptions about power relations and agents’ preferences.

Suggested Citation

  • Oliver Richters & Erhard Gloetzl, 2018. "Modeling economic forces, power relations, and stock-flow consistency: a general constrained dynamics approach," Working Papers V-409-18, University of Oldenburg, Department of Economics, revised May 2018.
    • Handle: RePEc:old:dpaper:409
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    References listed on IDEAS

    as
    1. Roberto Veneziani & Luca Zamparelli & Michalis Nikiforos & Gennaro Zezza, 2017. "Stock-Flow Consistent Macroeconomic Models: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1204-1239, December.
    2. Richters, Oliver & Siemoneit, Andreas, 2017. "Consistency and stability analysis of models of a monetary growth imperative," Ecological Economics, Elsevier, vol. 136(C), pages 114-125.
    3. Glötzl, Erhard, 2015. "Why and How to overcome General Equilibrium Theory," MPRA Paper 66265, University Library of Munich, Germany.
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    5. Edwin Le Heron & Tarik Mouakil, 2008. "A Post‐Keynesian Stock‐Flow Consistent Model For Dynamic Analysis Of Monetary Policy Shock On Banking Behaviour," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 405-440, July.
    6. Eugenio Caverzasi & Antoine Godin, 2015. "Post-Keynesian stock-flow-consistent modelling: a survey," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(1), pages 157-187.
    7. Claudio H. Dos Santos & Gennaro Zezza, 2008. "A Simplified, ‘Benchmark’, Stock‐Flow Consistent Post‐Keynesian Growth Model," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 441-478, July.
    8. Graziani,Augusto, 2003. "The Monetary Theory of Production," Cambridge Books, Cambridge University Press, number 9780521812115, September.
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    10. Colander,David (ed.), 2006. "Post Walrasian Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521865487, September.
    11. Erhard Glötzl & Florentin Glötzl & Oliver Richters, 2019. "From constrained optimization to constrained dynamics: extending analogies between economics and mechanics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(3), pages 623-642, September.
    12. Colander,David (ed.), 2006. "Post Walrasian Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521684200, September.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. sfc models — New working paper
      by contrarianmedia@hotmail.com (Mike Norman) in Mike Norman Economics on 2018-06-20 13:55:00

    Citations

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    Cited by:

    1. Glötzl, Erhard, 2022. "Macroeconomic General Constrained Dynamic models (GCD models)," MPRA Paper 112385, University Library of Munich, Germany.
    2. Glötzl, Erhard, 2022. "A simple General Constrained Dynamics (GCD) model for demand, supply and price shocks," MPRA Paper 112386, University Library of Munich, Germany.
    3. Glötzl, Erhard, 2022. "General Constrained Dynamic (GCD) models with intertemporal utility functions," MPRA Paper 112387, University Library of Munich, Germany.
    4. Erhard Glötzl & Florentin Glötzl & Oliver Richters, 2019. "From constrained optimization to constrained dynamics: extending analogies between economics and mechanics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(3), pages 623-642, September.
    5. Richters, Oliver, 2021. "Modeling the out-of-equilibrium dynamics of bounded rationality and economic constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 846-866.
    6. Glötzl, Erhard & Glötzl, Florentin & Richters, Oliver & Binter, Lucas, 2023. "General Constrained Dynamic Models in Economics - General Dynamic Theory of Economic Variables - Beyond Walras and Keynes," MPRA Paper 118314, University Library of Munich, Germany.

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    More about this item

    Keywords

    Economic models; Disequilibrium Dynamics; Stock-Flow Consistent Models; Post Keynesian; Constrained Dynamics; Lagrangian Mechanics; Procedural Rationality.;
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