Agent-Based Model Liquidity Preference-X
From the Beginning of the World to a Steady State in 170 Steps
Every new iteration of government money system model from the very earliest, agent-based model simple (ABMSIM) to agent-based model liquidity preference - extended (ABMLP-X), must undergo a steady state model run test at key stages of its development.
The Standard Keynesian Multiplier
On pages 68 and 69 of their book, Monetary Economics, Godley and Lavoie (G&L) walk us through a numerical example of their simplest monetary model with outside money (Model SIM). This is, in their words, “an example of how this whole model evolves through time, starting with the beginning of the world.” To continue, “The income tax rate is 20%, while the consumption function is 0.6 (income) and 0.4 (wealth) respectively. We start from a situation where there is no economic activity whatsoever, and where none has ever existed. Households have no income, and they never accumulated any wealth. The government expenditures generate income, a tax yield, a money supply and a consumption stream. The government has suddenly come in, and decides to order £20 worth of services from the production sector. These services are paid for by the creation of 20 units of cash money, that is £20. The money created is then circulated within the system..”
See a description of how I interpret G&L’s simplest model on the GiltEdged.systems site.
At the time of writing, the latest model (ABMLP-X) is at a development stage where it must undergo a steady state model run test. Though ABMLP-X has vastly more enhanced accounting and agent structures than ABMSIM, the core macro output (Core Indicators) must match the output of earlier models if presented with the same, simplest array of steady state parameters. That is, the test run must confirm the simplest fundamental stock-flow consistency still holds in ABMLP-X.
This is a stripped down run consisting of a population of just two Firms and two Households (no unemployment) - along with the singular agents; Government, Central Bank, Private Bank and Fund Manager.
Model: ABMLP-X.
Output: Steady State Run Dashboard.
Scenario Run Parameters: model-params-steady-state.