We revisit a recently introduced agent model[ACS {\bf 11}, 99 (2008)], where economic growth is a consequence of education (human capital formation) and innovation, and investigate the influence of the agents' social network, both on an agent's decision to pursue education and on the output of new ideas. Regular and random networks are considered. The results are compared with the predictions of a mean field (representative agent) model.
We propose in this work a kinetic wealth-exchange model of economic growth by introducing saving as a non consumed fraction of production. In this new model, which starts also from microeconomic arguments, it is found that economic transactions between pairs of agents leads the system to a macroscopic behavior where total wealth is not conserved and it is possible to have an economic growth which is assumed as the increasing of total production in time. This last macroeconomic result, that we find both numerically through a Monte Carlo based simulation method and analytically in the framework …
This paper analyzes the equilibrium distribution of wealth in an economy where firms' productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, dynasties have linear consumption functions and government imposes taxes on capital and labour incomes and equally redistributes the collected resources to dynasties. The equilibrium distribution of wealth is explicitly calculated and its shape crucially depends on market incompleteness. In particular, a Paretian law in the top tail only arises if capital markets are incomplete. The Pareto exponent de…
This research deals with the mathematical modeling of the physical capital diffusion through the borders of the countries. The physical capital is considered an important variable for the economic growth of a country. Here we use an extension of the economic Solow model to describe how the smuggling affects the economic growth of the countries. In this study we rely on a production function that is non-concave instead of the classical Cobb-Douglas production function. In order to model the physical capital diffusion through the borders of the country, we developed a model based on a parabolic …
We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which, in the long run, leads to the destruction of individual human capital and the extinction of the individualistic society. When agents are linked by fully-redistributive taxation the situation might turn to individual growth in the long run. We consider that a government collects a proportion of income and reduces it by a fraction as costs for administration …
The accurate characterization of the business cycles in the nonlinear dynamic financial and economic systems in the time of globalization represents a formidable research problem. The central banks and other financial institutions make their decisions on the minimum capital requirements, countercyclical capital buffer allocation and capital investments, going from the precise data on the business cycles. We consider the two possible interaction scenarios, when there are: the linear interactions, and the non-linear interactions. In our opinion, the main parameters of the business cycle may devi…
We investigate the dynamics of growth models in terms of dynamical system theory. We analyse some forms of knowledge and its influence on economic growth. We assume that the rate of change of knowledge depends on both the rate of change of physical and human capital. First, we study model with constant savings. The model with optimised behaviour of households is also considered. We show that the model where the rate of change of knowledge depends only on the rate of change of physical capital can be reduced to the form of the two-dimensional autonomous dynamical system. All possible evolutiona…
We study the capital growth in gambling with (and without) side information and memory effects. We derive several equalities for gambling, which are of similar form to the Jarzynski equality and its extension to systems with feedback controls. Those relations provide us with new measures to quantify the effects of information on the statistics of capital growth in gambling. We discuss the implications of the equalities and show that they reproduce the known upper bounds of average capital growth rates.
Purpose: A significant number of the non-financial firms listed at the Nairobi Securities Exchange (NSE) have been experiencing declining financial performance which deters investors from investing in such firms. The lenders are also not willing to lend to such firms. As such, the firms struggle to raise funds for their operations. Prudent financing decisions can lead to financial growth of the firm. The purpose of this study is to assess the effect of Share capital on financial growth of Non-financial firms listed at the Nairobi Securities Exchange. Financial firms were excluded because of th…
Economic growth is unpredictable unless demand is quantified. We solve this problem by introducing the demand for unpaid spare time and a user quantity named human capacity. It organizes and amplifies spare time required for enjoying affluence like physical capital, the technical infrastructure for production, organizes and amplifies working time for supply. The sum of annual spare and working time is fixed by the universal flow of time. This yields the first macroeconomic equilibrium condition. Both storable quantities form stabilizing feedback loops. They are driven with the general and tech…
A technique from stochastic portfolio theory [Fernholz, 1998] is applied to analyse equity returns of Small, Mid and Large cap portfolios in an emerging market through periods of growth and regional crises, up to the onset of the global financial crisis. In particular, we factorize portfolios in the South African market in terms of distribution of capital, change of stock ranks in portfolios, and the effect due to dividends for the period Nov 1994 to May 2007. We discuss the results in the context of broader economic thinking to consider capital flows as risk factors, turning around more estab…
Scaling relations, such as the IPAT equation and the Kaya identity, are useful for quickly gauging the scale of economic, technological, and demographic changes required to reduce environmental impacts and pressures; in the case of the Kaya identity, the environmental pressure is greenhouse gas emissions. However, when considering large-scale economic transformation, as with a shift to a low-carbon economy, the IPAT and Kaya identities and their cousins fail to capture the legacy of existing capital, on the one hand, and the need for new investment, on the other. While detailed models can capt…
Recent research in economic theory attempts to study optimal economic growth and spatial location of economic activity in a unified framework. So far, the key result of this literature - asymptotic convergence, even in the absence of decreasing returns to capital - relies on specific assumptions about the objective of the social planner. We show that this result does not depend on such restrictive assumptions and obtains for a broader class of objective functions. We also generalize this finding, allowing for the time-varying technology parameter, and provide an explicit solution for the dynam…
Every production-recycling iteration accumulates an inevitable proportion of its matter-energy in the environment, lest the production process itself would be a system in perpetual motion, violating the second law of Thermodynamics. Such high-entropy matter depletes finite stocks of ecosystem services provided by the ecosphere, hence are incompatible with the long-term growth in the material scale of the economic process. Moreover, the complex natural systems governing such stocks respond to depletion by possibly sudden environmental transitions, thus hindering markets' very ability to adapt t…
Some agent-based models for growth and allocation of resources are described. The first class considered consists of conservative models, where the number of agents and the size of resources are constant during time evolution. The second class is made up of multiplicative noise models and some of their extensions to continuous-time.
The fundamental purpose of the present research article is to introduce the basic principles of Dimensional Analysis in the context of the neoclassical economic theory, in order to apply such principles to the fundamental relations that underlay most models of economic growth. In particular, basic instruments from Dimensional Analysis are used to evaluate the analytical consistency of the Neoclassical economic growth model. The analysis shows that an adjustment to the model is required in such a way that the principle of dimensional homogeneity is satisfied.
Growth rate of the world Growth Domestic Product (GDP) is analysed to determine possible pathways of the future economic growth. The analysis is based on using the latest data of the World Bank and it reveals that the growth rate between 1960 and 2014 was following a trajectory approaching asymptotically a constant value. The most likely prediction is that the world economic growth will continue to increase exponentially and that it will become unsustainable possibly even during the current century. A more optimistic but less realistic prediction is based on the assumption that the growth rate…
This paper examines the impact of financial risks on economic growth in the first 15 Member States of the European Union, considering 1995-2014 period and aims to lay down a new explanatory model of economic growth, based mainly on the behavioral reactivity of the financial disruptions mentioned above. The model was estimated through the panel estimated generalized least squares method and included additional control variables in order to strengthen the research conducted. Our goal consists in the examination of the financial risks in the European Union and in the estimation of their impact on…
A financial market comprising of a certain number of distinct companies is considered, and the following statement is proved: either a specific agent will surely beat the whole market unconditionally in the long run, or (and this "or" is not exclusive) all the capital of the market will accumulate in one company. Thus, absence of any "free unbounded lunches relative to the total capital" opportunities lead to the most dramatic failure of diversity in the market: one company takes over all other until the end of time. In order to prove this, we introduce the notion of perfectly balanced markets…
Warning signs about the developing economic crisis in Greece were present in the growth rate of the Gross Domestic Product (GDP) and in the growth of the GDP well before the economic collapse. The growth rate was strongly unstable. On average, in less than 50 years, it decreased 10-folds but after reaching a low minimum it quickly increased 6-folds only to crash before completing the full cycle. The decreasing growth rate was leading to an asymptotic maximum of the GDP but it was soon replaced by a fast-increasing growth rate propelling the GDP along a pseudo-hyperbolic trajectory, which if co…
We propose an extremely simple mathematical model that is shown to be able to account for more than 99 per cent of all the variation in economic and demographic macrodynamics of the world for almost two millennia of its history. This appears to suggest a novel approach to the formation of the general theory of social macroevolution.
