Since the time of Adam Smith, economists have studied the dynamics of economic systems. From a system dynamics perspective, the change in any system over time occurs when flows accumulate in stocks - i.e., by the process of integration. Of course, economists have long been familiar with, and...

In this chapter, we demonstrate a way to get started with system dynamics modeling of a national economy, using a modular software framework called the MacroLab Template. The Template can be customized to reflect a modeler’s hypotheses about how an economy works. To illustrate the modeling...

Many important regularities observed in the economy are feedback processes, including stability, fluctuations, crises, lock-in/network effects and growth. Each type has its endogenous causal structure, driven by its specific incentive structure and agents' behavioural responses. The price...

Money stock, defined as the sum of coins, notes, demand and time deposits, decisively affects macroeconomic variables such as GDP and price. Yet its true nature has been obscured in economics. Where does it come from? How are they created, and how much? Concerning money creation under the...

In 1949, A. W. H. (Bill) Phillips and Walter Newlyn designed and built an electro-hydraulic dynamic model of the macroeconomy of a country. It was the first analog computer to solve the nonlinear coupled differential equations of mid-twentieth century economic theory and led to the use of...

Organized crime satisfies the demand for protection and enforcement of property rights in the absence of effective government institutions. However, weak law enforcement alone cannot explain the cross-regional differences in mafia activity. This chapter develops a feedback model of economic...

System dynamics and econometrics have traditionally been seen as contrasting and sometimes conflicting approaches for deriving parameters for economic models. System dynamics as a simulation method uses repeated runs to achieve calibration through optimisation, whereas simulation as an...

The neoclassical models of economics seem to have eluded the concept of physical limits to growth by assuming that the market and the technological advances evoked by it will make it possible to tap new resources and create substitution of production factors. They have also rarely addressed...

The WORLD7 model is an integrated assessment model. It includes a biophysical global economic model, based on first principles of physics and thermodynamics for consistency. In the WORLD7 model, revenue and profits come from extraction of natural resources, input of human labour, mechanization,...

This chapter documents a multi-disciplinary collaboration among a mathematical economist, an ecological economist, and a systems scientist to demonstrate the contributions of system dynamics (SD) to the advancement of dynamic modeling in ecological economics. Ecological economics is a...