Teaching Macroeconomics by Model

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The present economics crisis is due (in part) to a lack of understanding about how our social system works. Today macroeconomics is very badly taught and far too complicated explanations are given. It is confusing for students to grasp the principles of macroeconomics because they are not presented in the most obvious and useful way. The aim of this model and technique is to overcome the lack of this understanding and to make the subject more accessible.

Unfortunately the deliberately confusing attitude to our social system is the result of the control of the knowledge of this subject, being spread as economics teachings to our high-school students and undergraduates. The controllers of the spread of this knowledge are capitalists and monopolists, who support the universities and political forces with money donations. It is in their interest that this subject is confused and incomplete.

Macroeconomics is a logical scientific subject which can most easilly and comprehensively be fully represented by the model shown in the first diagram. Unlike other kinds of representations, this model has 6 entities and 19 mutual flows of money and goods etc. This is regarded here as all that is needed to cover the operation of our social system (sometimes called the "big picture"). The functioning of these idealized entities determine the aggregate quantities that are traded and pass between them.

The diagram has a mechanical equivalent shown in the second illustration. This model is useful for explaining how our system works; the variables now taking the form of weights that pull on the arms of 6 weighing (or balancing) beams. This compound machine balances the input and output flows of the entities so that a state of equilibrium is obtained. Each flow has a algebraic symbol and is regarded as a variable of the dynamic system. The engineering method of systems-analysis is used to determine the effects after the introduction of various kinds of exogenous changes, which are subsequently spread over the whole system according to decisions made by the entities. Their decision-making is programmed according to the nature of each entity and by certain general rules. These decision are also affected by the external condition of the whole system.

Analysis of the general system shows that it is stable over short terms and that equilibrium will always be reached. The model is regarded as a tool for both teaching and for the exploration of government policy, which for example can introduce different taxation regimes or other kinds of regulation into the flow quantities and thereby affect the decision-making criteria taken by the entities. As a result of the finding of a new state of equilibrium, a better understanding of national policy will follow.


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  • Name:
    David Harold Chester
  • Type of entry:
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  • David Harold's favorite design and analysis tools:
    Various simulation programs for mechanical operation and non-linear motion including landing-impact (and other impact) of aircraft. Stability studies of systems using linearized criteria. Improved way of explaining how macroeconomics works.
  • David Harold's hobbies and activities:
    Writing and explaining how things work
  • David Harold is inspired by:
    The need for making progress in scientific knowledge and its engineered applications.
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