Economic flow networks

For the purpose of later analysis, I'm going to mention abstract flow networks, then indicate that both the real economy and the financial economy are examples of abstract flow networks.

The real economy is a flow network involving goods, services, infrastructure and so on.

The control economy is a flow network of money.

An abstract flow network is a combination of:

• nodes
• directed edges (also known as directed flows)

These elements are connected as follows:

• every directed edge originates at a node and ends at a node. The starting and ending nodes may be the same.
• 
  

These can be . . .

I need a picture. How do I get pictures into this blog?

Relaxation Oscillation

OK. This will be quick. Elegance and revision are for later.

You might want to visit the Wikipedia article on relaxation oscillation at http://en.wikipedia.org/wiki/Relaxation_oscillator . This will give some partially understandable background for people with an interest in engineering and physics.

I maintain that the control component of the economy, that is, the BAFLM (for Banking, Accounting, Financial, Legal and Monetary) component, is subject to relaxation oscillation that manifests itself as the well-known Boom and Bust Cycle (BaBC).

Relaxation oscillation can occur in a physical system, a financial system, as well as in many other systems whose numerically measurable variables are subject to

• accumulation,
• build-up,
• overshoot of an upper threshold,
• discharge and depletion of the accumulated quantity
• passage of the level of accumulation to a below a lower threshold
• cessation of the discharge process,
• and a return to the top of the list, yielding cyclic repetition of the process.

Rather than continuing to pound home the point that the abstract description of relaxation oscillation applies to many specific areas(e.g. physics, finance, diet, etc.), we will pick one and suggest that the reader translate the process described in the chosen application to an application familiar to and comfortable for him.

Relaxation oscillation usually occurs in the context of the flow of a particular quantity, part of which can be accumulated in a storage device of limited capacity. When the accumulation exceeds the capacity of the storage device, the . . .

I'm out of time again. I'll try to pick this up soon.

Economic Stability

Economics has been making sense for me after seeming to be impenetrable for several decades. So for about two years, the pieces of the economic puzzle have been falling together, one by one.

At this point I've become confident enough to announce a solution to the problem of economic stability. Even though I've had a mathematical framework at the back of my mind, the underlying model and logic are presently available only in words. Maybe I'll throw in a few diagrams or equations if it isn't too much work.

I expect this exposition to appear in bits and pieces, since the argument requires a fair amount of background and build-up before the conclusion seems obvious.

For starters, rather than be too precise, I'm going to go for just laying the argument down. I'll come back, pick up the pieces and reorganize later.

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The problem under scrutiny here is the problem of optimal management of the real economy. Taking the productive capacity of infrastructure, housing, people, businesses, utilities, government and so on as given, I am referring to the flow of goods and services.

We all know now that the real economy can freeze up, partially or even totally, and begin to produce goods and services at a rate far below that which the productive capacity can attain.

By the problem of stability, I mean the issue/problem/challenge of keeping the rate of flow of goods and services at a level sufficient to care for the requirements of the people in the society, the physical infrastructure itself, and the society as a whole. I will extend and refine this oversimplification later.

Bringing this close to home, we all want to live in good economic times and to avoid having to live in an economic recession, or even worse in a depression.

I use a four-level model as a framework for the exposition:

1. Context
2. Paradigm
3. Control layer (BAFLM)
4. Real economy (RE).

We postpone the discussion of Context and Paradigm for later, briefly remarking that these are the levels within which everything in the control layer is generated.

The Control layer is perhaps better characterized as the Banking/Accounting/Financial/Legal/Monetary layer. That's BAFLM for short.

Coupled together, the BAFLM layer and the Real Economy form a feedback and control system, with the RE playing the role of the controlled component and the BAFLM layer playing the role of the control system.

The value of conducting economic discussions in terms of feedback and control systems is that emotion and politics are minimized at the same time that clarity and tractability are promoted.

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If we examine the economic system currently in play in the US, we might look to see whether or not it exhibits something like a design. . . .

OOPS! I'm out of time. More Later

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