DISEQUILIBRIUM ECONOMICS AND DEVELOPMENT

Fernando Thome and Silvia London
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Fernando Thome: Universidad Nacional del Sur

No 377, Computing in Economics and Finance 2000 from Society for Computational Economics

Abstract: The history of Economic Theory shows in several stages the influence of Thermodynamics. The analogies between economic systems and thermodynamic systems are at the same time quite obvious and misleading. Important thermodynamic notions lack of counterparts in Economics, making the goal of transferring concepts -other than the trivial analoges- from one discipline to the other an epistemological dead end. The transference of formal devices, instead, became a feasible goal. Procedures like comparative statics were imported directly from thermodynamics, making possible to relate equilibria in economic systems to properties of their environments.Continuing that tradition we claim that it would be profitable for Economics to borrow formalisms from Open Systems Theory, the not yet well defined set of extensions of Thermodynamics to the analysis of open systems. These methods have been applied in several sciences to study the behavior of systems away from equilibrium. In this paper we discuss briefly the epistemological rationale for this claim and present a model that cannot be analyzed in classical terms as to show how the tools of O.S.T. can be applied in order to represent the relevant economic phenomenon of development.The non-linear interaction among different sectors of an economy may explain how spillover effects make the entire system either grow or fall. After a transient with fluctuations a sustained development process may arise. In our model we show how this can happen.

Date: 2000-07-05
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