A number of proposals have been advanced in recent years for the development of “general systems theory” which, abstracting from properties peculiar to physical, biological, or social systems, would be applicable to all of them. We might well feel that, while the goal is laudable, systems of such diverse kinds could hardly be expected to have any nontrivial properties in common. Metaphor and analogy can be helpful, or they can be misleading. All depends on whether the similarities the metaphor captures are significant or superficial.

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The Architecture of Complexity

In order to explain fairly simply how expectations are formed, we advance the hypothesis that they are essentially the same as the predictions of the relevant economic theory. In particular, the hypothesis asserts that the economy generally does not waste information, and that expectations depend specifically on the structure of the entire system. Methods of analysis, which are appropriate under special conditions, are described in the context of an isolated market with a fixed production lag. The interpretative value of the hypothesis is illustrated by introducing commodity speculation into the system. 1. INTRODUCTION THAT EXPECTATIONS of economic variables may be subject to error has, for some time, been recognized as an important part of most explanations of changes in the level of business activity. The "ex ante" analysis of the Stockholm School-although it has created its fair share of confusion-is a highly suggestive approach to short-run problems. It has undoubtedly been a

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Rational Expectations and the Theory of Price Movements

Economists have long been interested in how technological change affects long-run growth and aggregate fluctuations, yet it remains most often treated as incremental in nature, adding only a trend to standard growth models. History tells us, however, that such change can appear in bursts, with flurries of innovative activity following the introduction of a new core technology. This observation leads economists to reserve the term ‘general-purpose technology’ (GPT) to describe fundamental advances that drive these flurries, which in turn transform both household life and the ways in which firms conduct business. Over the past 200 years or so, steam, electricity, internal combustion, and information technology (IT) seem to have served as GPT-type technologies. They affected entire economies. Earlier, the very ability to communicate in writing and later to disseminate written information via the printed page also appears to fit well into the idea of a GPT.

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general purpose technologies

In many problems of economic theory we need to use aggregates. The general Walrasian system and its more modern dynamic extensions are relatively barren of results for macroeconomics and economic policy. Hence, in our desire to deal with such questions we use highly aggregated systems by sheer necessity, often without having much more than the same necessity as our justification. Perhaps the most important result to date for justifying aggregation under certain circumstances is the Lange-Hicks1 condition, about which we shall say more later.

Aggregation of Variables in Dynamic Systems

In this paper we study the evolution of the labor share in the OECD since 1970. We show it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or the skill mix; and that discrepancies between the marginal product of labor and the real wage (due to, e.g., product market power, union bargaining, and labor adjustment costs) cause departures from it. We provide estimates of the model with panel data on 14 industries and 14 countries for 1973-93 and use them to compute the evolution of the wage gap in Germany and the US.

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Explaining Movements in the Labor Share

Presented here is a starkly schematised and hence quite unrealistic model of cycles in growth rates. This type of formulation now seems to me to have better prospects than the more usual treatment of growth theory or of cycle theory, separately or in combination. Many of the bits of reasoning are common to both, but in the present paper they are put together in a different way.

A Growth Cycle

Capitalism as creative, chaotic evolution by structural change Classical dynamics: the corn economy The von Neumann model as a chaotic attractor Growing in short and long waves The structural and dynamical instability of the modern economy An analysis of high and low growth rates Irregular waves of growth from structural innovation Dynamical control of economic waves by fiscal policy A fresh look at traditional cycle models Chaotic aperiodic behaviour from forced oscillators.

Chaotic Economic Dynamics

There is widespread agreement that it is necessary to introduce into economics both dynamical relations and general interdependence. This is not a counsel of perfection or a manifestation of the desire for theoretical elegance and completeness. The most concrete, practical analysis is often vitiated by restrictive assumptions which ignore or ‘eliminate’ the elements of change and of interconnectedness. When two sectors of an economy are interdependent in some way (coupled, we may say), and when we have another than the null or trivial solution of no change, then it is quite inadmissible to discuss the one sector assuming the other unchanged. For, if the one does not remain constant, the other cannot either, by virtue of the coupling. Therefore to allow one sector to vary and keep the other constant would be to hold contradictory assumptions.

Dynamical Coupling with Especial Reference to Markets Having Production Lags

The great attraction of the Keynesian system is its simplicity, which is, at the same time, its danger and its limitation. I propose to indicate how we may relax its cruder aggregative aspects without too hopelessly complicating matters. To accomplish this step we naturally turn to the Leontief matrix as an adequately simple representation of general equilibrium. Yet it is generically different from the Keynesian system by being homogeneous, i.e. the proportions are unique, but the scale of the whole system may be any multiple of the correct proportions. Only a small change is required to transform the one into the other, but it is just this small change which is necessary to study the short run generation and propagation of income.

The Multiplier as Matrix

Part 1 Basic concepts dual linear theory of output and value dual linear dynamics the fluctuating evolution of capitalism, Richard M. Goodwin. Part 2 Mathematical descriptions of the multisectoral model closed multisectoral models prices and the process model, Lionelli F. Punzo.

Richard M. Goodwin

Papers

A Growth Cycle

Chaotic Economic Dynamics

Dynamical Coupling with Especial Reference to Markets Having Production Lags

The Multiplier as Matrix

The dynamics of a capitalist economy