Economy from a systems perspective p9

These presenter entries show the development of the quiet comprehensive yet never complete model.

It started with the very simple assumption that we can only earn the money that others spend. A closed loop with no growth neither from investments nor from an increase of population.

To prepare for more the model now distinguishes products and services and make jobs explicit. However, it is still closed loops...

To explain rising inequality we have to look at credits and investments. The first stage is to still consider the economy a closed loop with spending and lending only the money there is. In that system there is the reinforcing feedback loop of interest income that adds to income to the extent that both the consumers as the enterprises get less than they owe.

Now, to open the loop we have to include "Money creation". There are different forms of it but basically it means that banks are allowed to lend more money than they hold savings so that there is an additional amount of money that actually isn't physically available. There is a lot more to this and there is the history that money needs to be backed by physical gold etc. etc. .... But the idea is that this additional money is for investments and credits to increase the wealth for more people. Unfortunately, the money creation allows banks to receive interests so this system continues to fuel the reinforcing feedback loop of inequality while no one cares because it still provides for more services and products for the rest of the people.

To understand inequality we have to include a factor "Wealth". So far the model only looks at materialistic wealth (not welfare, not happiness) that is defined by money and material wealth. Since this now 'open loop' model creates growth I had to include a first limiting factor, the "Stock of material resources" and the "End of life for products".

In economics you learn a lot about prices, their elastics, the margin costs, etc.... To include some drivers for the price for products I have included the economies of scale (also as a proxy for efficiency and effectivity gains) from mass production and the price for raw materials.

In this step I have included Inequality, Minimum wages, Taxes, Public spending, and a psychological aspect that we strive to HAVE something which could be changed by a wish to DO something. Also notable, the differentiation between sinks and sources that still needs to be modeled.

Inequality has to do with Job rate that indirectly has to do with our Wish to work full time. At least in the future there are potentials of a productive society with more equal income that decides to have more time for fulfilling and fun activities (like Harari describes in Sapiens).

It is tempting to take an early look at the matrix analyses but without weighting of connections it actually makes little sense.

Here we are almost outside economics when we look at narratives for transformation. Note: a Change of values is a result, not an action.

Here we see the reinforcing feedback loop of artificial intelligence. More details on this you will find here: https://www.know-why.net/model/C2p4ku5BVXfJe92ssxTfzlw and https://www.imodeler.de/a/ConsideoPaper-IKT-Dt.pdf (German)

Big question: is inequality a driver for or against minimum wages?

Another question: Does the decoupled finance industry in the end foster the real economy or does it draw money from it in particular if inequality leads to very rich persons?

Inflation - a devil‘s cycle with side effects and actually some crucial time delays.

The effect of the central banks

Government debts