The Visible Hand

In the last decade highly innovatory developments have taken place in theoretical economics. The new focus of interest seems to be twofold: Firstly, nonlinear models for dynamic processes of the economy are constructed to extend the scope of linear models for tlle stationary euqilibrium state; and secondly a new approach is made to solve the everlasting problem of the relation between micro-and macro-economics. The interdisciplinary field of synergetics is deeply involved in this evolution. The author has made a remarkable contribution to both foci: His application of synergetic concepts to the theory of business cycles combines a partial solution of the micro-macro-problem, namely the modelling of the macro-economic effect of the decisions of investors, producers and consumers, with the natural introduction of nonlinearities. The arising new business cycle theory can on the one side be validated by empirical evidence and on the other hand the typical behavior of nonlinear dynamic systems including the transition to deterministic chaos can be clearly demonstrated. The hope is justified that the model presented in this book is a fw·ther important step in reaching a new level of the quantitative comprehension of dynamic phenomena in the economy. Stuttgart, June 1991 Prof. Dr. Wolfgang Weidlich Foreword It is the author's objective to explain macroeconomic processes on the basis of micro economic decision-making behaviour. In order to achieve this goal, the concept of synergetics is presented as a method of describing dynamic phenomena in multi-com ponent systems with cooperative interactions between their elements.

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With the help of the method of synergetics this study showsa consistent formal derivation of the dynamics of amacroeconomic system as the effect ofthe decisionbehavior of the microeconomic agents. A special issue is theeconomic interpretation of the synergetic modelling of themicrolevel and its relation to other economic research onmicrofoundations of the macroeconomics, i. e. the NewClassical and the New Keynesian approach. The transformationof a well-known macroeconomicbusiness cycle model into amicro-based synergetic model gives an illustrative examplehow the method can be applied to economic problems. It canbe shown that the transformed model generates newinteresting features like inherent and assymetric cycles, ahigh stability to exogenous shocks and even a so called"deterministic chaos". Beside these new featuresthe mainstructure of the basic model in terms of the causality ofthe relevant parameters remains unchanged. Thus, theinvestigation gives the researcher an example of a methodthat makes it possible to "test" the macroeconomic effectsof different behavior assumptions of the economic agents onthe macrolevel in a dynamic context. The work ends with anattempt of an interpretation of macroeconomic data of theFRG in the last thirty years in the way that it is tracedback to changes in the behavior of the economic agents.

Contenu
I. Introduction.- 1. Temporary Equilibrium Theory.- 2. Evolutionary Economics.- 3. Synergetics as a Dynamic Decision Theory.- II. Application of Synergetics in Business Cycle Theory.- 1. Basic Linear Model.- 2. A Synergetic Model of Demand for Investment.- 3. Producers' Decision on the Output Level.- 4. Consumers' Decision.- III. Empirical Evidence.- 1. Goals and Methods.- 2. Empirical Test of the Model with Macrodata.- 3. Empirical Test of the Model with Microdata.- 4. Remarks.- IV. Conclusion.- References.- Index of Figures and Tables.