System Dynamics and Macroeconomics

[John]

Mainstream macroeconomic theory, invented by Maynard Keynes in the
1930s, has failed to predict or explain anything that's happened
since the bubble started, including the bubble itself. We need a new
"Dynamic Macroeconomics" theory.

Macroeconomic theory was invented in the 1930s to develop policies to
prevent a stock market bubble and Great Depression. It's failed to
predict or explain the 1990s stock market bubble or almost anything
in the 2000s decade.

The reason for the massive failure of mainstream macroeconomics is
because it fails to take generational dynamics into account. The
only distinctions made by mainstream macroeconomics models are age
and class. In other words, those models assume that a 1960s
40-year-old, who lived through the Great Depression, has the same
attitudes and behaviors toward money as a Generation-X 40-year-old
today. That assumption is utterly insane, and yet it permeates
mainstream macroeconomics.

And that's why mainstream macroeconomics has been a total, utter
failure.

This is the place to discuss System Dynamics and macroeconomics.

To get you started, please read the following:

** System Dynamics and the Failure of Macroeconomics Theory
http://www.generationaldynamics.com/cgi ... acro061025

Sincerely,

John

John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.GenerationalDynamics.com/forum

[Rafaelloello]

"In other words, those models assume that a 1960s
40-year-old, who lived through the Great Depression, has the same
attitudes and behaviors toward money as a Generation-X 40-year-old
today. That assumption is utterly insane, and yet it permeates
mainstream macroeconomics."

I agree. I think the complicated part is coming up with a model that takes into account the in-betweens. I was born in 1960, my wife in 1963. We find our values are on the cusp of two generations, almost making our value set a minority in-between generation. We were too young to go to Woodstock, and not raised by parents who really knew the Great Depression. Our parents are also kind of sandwiched between two generations (3 of our 4 parents were born in 1936, the fourth in 1934). The depression was just about over before their distinct early childhood memories formed.