Quantitative Model on Economics with degrowth

Quantitative (system dynamics) model on economical developments

This quantitative model compares the average income and wealth of the people that earn above the average or those who lend money with those below average or those who borrow money.

It includes
- interest rates
- initial inequality
- savings quota
- money creation (the possibility of banks to lend more than they hold)
- productivity
The model allows to understand the basic developments and to try scenarios on
- degrowth, by trying a negative productivity
- re-coupling of financial and real economy by negative money creation
- use or harm of interest rates decoupled from productivity
In order to explore some scenarios I have saved with the model got the the factor "discrepancy" and look in its full view cockpit for the parameters and the scenarios.

Please discuss the model. If you want the model itself and not just the link let me know: info@ilsa.de (Kai Neumann)

This scenario (see the parameters on the right) shows a limit to the wealth of the others while the wealth of the rich still grows due to productivity gains The discrepancy thus continues to grow.

The money of the others becomes negative.

This shows another scenario with less volume on the financial markets and lower interest rates. The total wealth of the rich is lower but it allows an continued increase of wealth for the others as well despite an increase of inequality.

... showing the money situation

This scenario shows a zero productivity gain with decreasing money for the others

.... a negative development of productivity (e.g. less people being productive due to demographic change)

In this scenario the money creation (the extra money that banks create without a basis and yet they as part of the rich are allowed to earn interest rates from it) is reduced from 90 to 0 over the time period. Obviously it has only an influence on the total amount of money but less influence compared to productivity gains.

Productivity seems to be crucial as this and the following scenarios show ....

.... lower interest rates ...

... no interest rates ....

Adding the factor degrowth shows that the material wealth of the others might be diminished....

... while the wealth of the rich remains relatively high.
So without a measurement for happiness the moneywise degrowth seems to be kind of counterproductive. Of course, this aspect should be further investigated, e.g. by assuming that not only the consumption of the others decreases but also their credit volume with all its impacts on interest rates and prices.