Summary of “Consequential Macroeconomics”

The basic model for representing the general social system has never been properly developed, due to the failure to seriously state and explain the initial assumptions and properly define the factors and variables. Results obtained from the over-simplified models of the past are unsatisfactory and they conflict with common sense. When the alternative of computer-modelling is used, the results become complex and difficult to follow. They are unsuitable for students to understand the essence of what is involved. 

The aim of this book is to correct this situation and to provide a logical, compact, but complete, presentation about of what our social system comprises and how it works. The attitude being taken is about viewing the system from sufficient a distance, so as to envisage it as a whole, as well as its components. It aims to provide a better perception and understanding of the complete social structure. It also introduces some original aspects of analysis into the subsequent methodology. The work is presented in 6 parts: “Getting Started”, “The Model”, “Analysis”, “Decisions”, “Money” and “Consequences”. In order to help with the continuity, particular details of certain aspects are presented in 7 appendices.   

After a review of the overall problem of complexity in representing our entire social system, a series of assumptions and early considerations are provided, along with the many necessary definitions. There is built up a base model that is logical in its development and which is virtually complete, whilst not being any more complicated than is absolutely necessary—in order to provide for the subsequent analysis, in a formal scientific manner.

This model below, is necessary and sufficient to cover what our social system does within a country.  This model contains 6 entities: Landlords, Government, House-Holders, Producers, Capitalists and Finance Institutions (banks). They are connected by 19 double flows, consisting of the money which mutually returns the values of the various kinds of goods, services and valuable legal documents, etc., that are uniquely provided by each entity. The model is expressed in three ways, by a diagram (here), by a set of algebraic identity-equations and by using W. Leontief’s “input/output” matrix. (The latter is subsequently used in the analysis and the development stages of this work.) The various entities, as parts of the model, are described and used for explanation about the circulation of money, goods, etc. This leads an examination of the matters of the general equilibrium and the system’s stability.  

Short-term disturbances to the steady-state condition result in the need for decision-making, which is carefully described in detail and later illustrated by four simplified numerical (hand-calculated) examples, three being about changed taxation and the associated short-term dynamics. The decision-making depends on the properties of the 6 entities. These properties are subsequently introduced and explained, to complete the analyses. This model is capable of simulating the progress of the complete system towards a new state of equilibrium after changes have happened or been introduced.

Theories about the development of money and banking are given, as well as the use of interest on borrowing. This leads to a discussion about the functions of governmental control. There follows a development about the most significant factors affecting the limitations to growth of the general system.  The last chapter of the book concludes with a long summary/review about what is implied, which takes into account the particular perspectives used in this work. The significance of topological properties of the system are noted. Past confusion between the macro- and micro- aspects of economics are described and clarified. This viewpoint provides a better, clearer and somewhat original understanding about what theoretical macroeconomics really is all about. The old concept that Macro- is scaled up Micro- is dismissed and a whole new science is born! Matters missed out also are noted.