Economic System Models


Simple models of economic systems — with carefully controlled limits — can prove useful in demonstrating specific parts of economic theory.

Mathematical modeling has rather severe limitations for depicting economic systems. Modeling, however, can prove useful within carefully controlled variables. In this section, I have developed some models of the simple economy for the purpose of demonstrating some fundamental interactions in economic systems.

Modeling a Simple Economy

Jay Forrester

Jay Forrester
Developer of System Dynamics

As complex adaptive systems markets do not lend themselves to mathematical models — in spite of the practice of many economic practitioners. If one is careful about the variables used, however, simple models can prove useful in demonstrating economic theory.

I have begun this section on economic system models with models of a simple economy in order to introduce some fundamental concepts about models and the economy. (Although you can view each part separately, I strongly suggest that you work through them in sequence.)