- published: 16 Nov 2013
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In economics, a model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified framework designed to illustrate complex processes, often but not always using mathematical techniques. Frequently, economic models posit structural parameters. Structural parameters are underlying parameters in a model or class of models. A model may have various parameters and those parameters may change to create various properties. Methodological uses of models include investigation, theorizing, and fitting theories to the world.
In general terms, economic models have two functions: first as a simplification of and abstraction from observed data, and second as a means of selection of data based on a paradigm of econometric study.
Simplification is particularly important for economics given the enormous complexity of economic processes. This complexity can be attributed to the diversity of factors that determine economic activity; these factors include: individual and cooperative decision processes, resource limitations, environmental and geographical constraints, institutional and legal requirements and purely random fluctuations. Economists therefore must make a reasoned choice of which variables and which relationships between these variables are relevant and which ways of analyzing and presenting this information are useful.
Ibn Khaldūn (/ˌɪbənxælˈduːn/; Arabic: أبو زيد عبد الرحمن بن محمد بن خلدون الحضرمي, Abū Zayd ‘Abd ar-Raḥmān ibn Muḥammad ibn Khaldūn al-Ḥaḍramī; May 27, 1332 – March 19, 1406) was a (Tunisian) ArabMuslim historiographer and historian, regarded to be among the founding fathers of modern sociology,historiography, demography, and economics.
He is best known for his book, the Muqaddimah (literally the "Introduction", known as the Prolegomena in Greek). The book influenced 17th-century Ottoman historians like Ḥajjī Khalīfa and Mustafa Naima who used the theories in the book to analyze the growth and decline of the Ottoman Empire. 19th-century European scholars also acknowledged the significance of the book and considered Ibn Khaldun as one of the greatest philosophers of the Middle Ages.
Ibn Khaldun's life is relatively well-documented, as he wrote an autobiography (التعريف بابن خلدون ورحلته غربا وشرقا, at-Taʻrīf bi-ibn Khaldūn wa-Riḥlatih Gharban wa-Sharqan) in which numerous documents regarding his life are quoted word-for-word.
The Solow–Swan model is an exogenous growth model, an economic model of long-run economic growth set within the framework of neoclassical economics. It attempts to explain long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity, commonly referred to as technological progress. At its core it is a neoclassical aggregate production function, usually of a Cobb–Douglas type, which enables the model “to make contact with microeconomics”. The model was developed independently by Robert Solow and Trevor Swan in 1956, and superseded the post-Keynesian Harrod–Domar model. Due to its particularly attractive mathematical characteristics, Solow–Swan proved to be a convenient starting point for various extensions. For instance, in 1965, David Cass and Tjalling Koopmans integrated Frank Ramsey's analysis of consumer optimization, thereby endogenizing the savings rate—see the Ramsey–Cass–Koopmans model.
The neo-classical model was an extension to the 1946 Harrod–Domar model that included a new term: productivity growth. Important contributions to the model came from the work done by Solow and by Swan in 1956, who independently developed relatively simple growth models. Solow's model fitted available data on US economic growth with some success. In 1987 Solow was awarded the Nobel Prize in Economics for his work. Today, economists use Solow's sources-of-growth accounting to estimate the separate effects on economic growth of technological change, capital, and labor.
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This video explains the role of 'models' in microeconomics. It uses the perfectly competitive market model as an example.
By this point in your course you may have learned the definition of a market: A place where buyers and sellers meet to engage in mutually beneficial exchanges. But what is a market economy? Two basic types of markets exist in any market economy: resource markets and product markets. The exchanges that take place in these markets benefit both the households and the firms that engage in exchanges. This lesson will introduce the circular flow of money, resources and goods and services in a market economy. We will examine how resources flow from households to firms, and goods and services from firms to households. We will also seek to explain why individuals are willing to engage in the exchanges that characterize the market system. http://www.econclassroom.com/?p=4397
What is a model/theory, and why do economists use them? "EPISODE 5A: Models and Theories" by Dr. Mary J. McGlasson is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
Here's a quick growth conundrum, to get you thinking. Consider two countries at the close of World War II—Germany and Japan. At that point, they've both suffered heavy population losses. Both countries have had their infrastructure devastated. So logically, the losing countries should’ve been in a post-war economic quagmire. So why wasn't that the case at all? Following WWII, Germany and Japan were growing twice, sometimes three times, the rate of the winning countries, such as the United States. Similarly, think of this quandary: in past videos, we explained to you that one of the keys to economic growth is a country's institutions. With that in mind, think of China's growth rate. China’s been growing at a breakneck pace—reported at 7 to 10% per year. On the other hand, countries li...
Will Day, a thought leader in sustainability, looks at what we currently understand of global trends, particularly focusing on issues like population, water and ecosystem health. He will also share his analysis of the the perverse incentives in the current model by which we live - the things we measure, things we value, and the short term nature of our demands. This all calls into question the ability of the planet to support a high consumption lifestyle for 9+ billion people. About TEDx: In the spirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection in a small group. These local, self-organized events are ...
Bismillahi Rahmani Raheem The Islamic economic system is neither Socialist nor Capitalist, but a "third way" with none of the drawbacks of the other two systems. Some brief examples of Islamic economic principles: • The fundamental economic problem is different from the capitalist model of unlimited wants and limited resources. Islam views the fundamental economic problem to be of fair distribution of resources by removing obstacles which prevent the fair distribution of resources • Interest is strictly forbidden, from banking, state and individual transactions in the Islamic economic model because it circulates wealth away from the people and society and circulates it to the wealthy - the rich grow richer • Certain resources cannot be held in private hands, under Shariah natura...
The Economic Model, one of the oldest models of Consumer Behaviour tries to explains what a person is likely to buy and in what quantity. This model takes into consideration the behaviour of an economic man, who would give foremost importance to the monetary or financial considerations while making a decision. The ultimate objective of an individual, as per this model, is the maximization of satisfaction by investing the minimum money resources for the satisfaction of needs and wants. Despite having certain limitations, it is one of the widely used models of consumer behaviour and is a must know for all the students of marketing and business management. This video has been converted from the class lecture notes with a voice-over prepared to explain the concepts in a lucid and easy to under...
Dr Frank Hollenbeck is back in the studio to discuss economists and economic models. Dr Frank explains why economists have such a difficult task in an ever-changing economic environment.
In this very simple model that assumes "Leontief-type" technologies (right-angled isoquants), economic growth depends on TWO factors: a country's saving/output ratio, and its capital/output ratio). The more of its output (GDP) that can be saved and plowed back into investment, the faster it will grow. However, the growth rate can be enhanced if the capital yields a "big bang for the buck" (invest in things that give a quick return on investment). This makes sense. Putting your investment in something that yields a (s)low return will dampen the growth opportunities. Note that while not said explicitly in the presentation, the country in the model must have labor available to complement the increased capital (surplus labor). This is a Lewis-type idea, except for the fact that this model is ...
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Intro screen to Economic models explained with Cows
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In the video, the YSI philosophy of economics group discusses the epistemological foundations of economic modeling and the route to a saner economic modeling project.
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