Economic modelling and SA

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Arild Angelsen
Junior Member
Posts: 2
Joined: Fri Mar 29, 2002 3:39 am

Economic modelling and SA

Post by Arild Angelsen »

Systems analysis (SA) has never been popular or really accepted among
economist (I am an exception), for some good and some not-so-good reasons.
Among the good ones are the fact that its hard to properly model economic
behaviour in a SA programme. I just read the book by Ruth and Hannon
Modelling Dynamic Economic Systems, and - sorry to say - I was
disappointed: its mainly about how to solve static economic problems in
Stella, and many of the problems could have been solved as easy or even
easier with Solver in a Spreadsheet. Its basically a problem of
incorporating simultaneous equations into SA.

Im working with local farmers use of tropical forests, and would like to
have a tree growth and ecological part (thats easy to model, given
reasonable data) with a economic behavioural block. Within the latter,
farmers should allocated their labour on different activities such that the
marginal return is the same (a typical first order condition in economic
theory). Marginal return can be just in financial terms, or it may be
adjusted for risk, preferences for certain activities, preferences for food
production, etc. The problem is that when one incorporates decreasing
marginal returns (normally necessary to get an interior solution), it
becomes a simultaneous equation problem.

I would like to get suggestions or even better - examples of models- of how
to bypass this problem. I have some ideas: use of delayed responses to cheat
the programme, use iterations until one gets close to the optimal path, or
making the SA programme interact with an optimization programme (e.g., a
linear programming programme, which gives the optimal solution for each
period, export the data to the SA programme, which takes them to the
beginning of next period and return them to the LP programme, and so on).

Best regards,

Arild Angelsen
Senior Scientist (PhD Economics)
Center for International Forestry Research (CIFOR)
P.O. Box 6596 JKPWB, Jakarta 10065, Indonesia
E-mail:
a.angelsen@cgnet.com
Tel. +62 251 622 622 (ext. 109)
Fax. +62 251 622 100
Web: http://www.cgiar.org/cifor/
"Robert L. Eberlein"
Junior Member
Posts: 3
Joined: Fri Mar 29, 2002 3:39 am

Economic modelling and SA

Post by "Robert L. Eberlein" »

Tom Fiddaman
Senior Member
Posts: 55
Joined: Fri Mar 29, 2002 3:39 am

Economic modelling and SA

Post by Tom Fiddaman »

There are many SD models of economic problems in which agents solve
allocation problems by local hill-climbing. For an example, see John
Stermans model on the use of aggregate production functions in the Model
Library of my web site (link below). The model illustrates a behavioral
interpretation of allocation with a three-factor production function. Its
fairly simple and easy to generalize.

- Tom

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Thomas Fiddaman, Ph.D.
Ventana Systems http://www.vensim.com
34025 Mann Road Tel (360) 793-0903
Sultan, WA 98294 Fax (360) 793-2911
Tom@Vensim.com http://home.earthlink.net/~tomfid/
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