The book establishes that economics can be studied and utilised on the basis of a minimum of fundamental hypotheses and the general laws of mathematics. Starting from 12 major propositions, it proves that closed exchange networks are replicated by systems of 2n first-order non-homogeneous linear differential equations, which simulate household, business, bank and government receipts and payments. Such networks are defined in the (R2n, t) vector space, where n is the number of sectors or markets and countries or currencies, while t is the elapsed time. Uniqueness, stability and controllability of the steady state as well as takings and outgoings are functions of behaviour coefficients and policy parameters. Annual sales of services, products and securities divided by average salaries, prices and values yield the man hours, output items and liquidity units traded. Demanded quantities do not coincide with available quantities. Potential inflation or deflation is proportional to the weighted deficit or surplus of market goods. Digital animation of the endogenous variables is possible on the basis of historical, projected or hypothetical data about the exogenous variables.
Author: Sophocles Michaelides
Year: 2006 (updated in 2017)