CmLab explores some of the dynamics of monetary systems. Money is the life-blood of the modern global economy in which all nations participate, and which they use to trade their raw resources, manufactured goods and marketable services. And yet money remains an enigma that raises many questions and engenders many answers, but knows little consensus. For some people “money” means banknotes and coins, or bank ledgers, or net worth statements. Theorists think of a medium of exchange of property rights, or a lien on future production. There are debates about metallism versus chartalism, U-shaped versus C-shaped, and more tax versus less tax. Economists, bankers, corporate financiers, and money analysts categorize it by its liquidity, its velocity, its multiplicative effects, its derivative nature, or its risk. Net worth becomes the standardized measure of all that a person holds, and utility in the service of profits is the measure of all that exists. However, with all of this attention, there still remain some troubling questions. What is the impact of the diamond-water paradox? What is the source of the “time value of money”? Where do profits and/or interest really come from?
Capital exchange models are peculiarly suited to a study of just such questions. They are agent-based economic models in which the biophysical components have simply been ignored, prices of goods and services play no role, and only the dynamic interactions of units of money are considered. In them money flows through the financial system like the flow of energy through a physical system, and this fact invites application of all of the well-known tools of statistical mechanics in its analysis. But first, we need to understand how to build better economic models.
This is one of a series of models exploring the dynamics of sustainable economics – PSoup, ModEco, EiLab, OamLab, MppLab, TpLab, CmLab. ABMs offer an excellent class of systems in which such dynamics can be studied.
This is a companion discussion topic for the original entry at https://www.comses.net/codebases/5603/releases/1.0.0/