LateModernPeriod1950-2000+

It might seem paradoxical or even foolish to apply a Neoclassical Economic Model to Iran: Free markets for Products, Capital and Labor?  Exogenous Total Factor Productivity Growth (Technology)? Iran is generally considered  a  mixed ,  centrally planned economy  with a large  public sector  ( here ). But what is easy to forget is the long period of attempted US domination prior to the Iranian Revolution in 1978-1979 . The US, especially in the Kennedy administration , was trying to Modernize Iran and transform it into a model Capitalist System . They failed and brought on the  Iranian Revolution   and the current Anti-Modern Theocracy . In any event, I always test a  Neoclassical Economic Model   as one of the competitor models when I estimate the best State Space model for a particular country. The causal model is presented above as a directed graph  (see the Symbols defined in Notes below). The graphic is b...

  In prior blog postings, I have usually displayed only the first three state variables of a DCM ( Dynamic Components Model ).   There are three reasons: (1) Typically, the first three state variables explain at least 90% of the variation in the underlying indicators. For example, in Iran (see the Measurement Matrix below in the Notes) the first three components ( IR1 , IR2 , IR2 ) explain 98% of the variation in the underlying indicators. (2) Also, typically, the first state variable describes overall growth in the system and the next two state variables describe historical cycles and feedback controllers ( here and here ). And, (3) it is difficult to explain the dynamic path of state variables in more than three dimensions. However, interesting dynamics are observed in the lower-order state variables. In the graphic above, the state space IR4 , IR5 and IR6 is displayed. The graphic above shows the unstable, cyclical dynamic state-space interaction between IR4 =( a Popula...

  According to Google AI, the Economy of Iran is facing "significant challenges"   to include international sanctions, inflation, currency devaluation, economic stagnation, corruption/mismanagement, dependence on oil, and brain drain. My forecasts for the  Economy of Iran  are equally pessimistic ( here ). On the other hand, if the  Economy of Iran   were entirely cut out of the World-System (say for twenty years), the World-System would take a big hit ( here ). Before we make any conclusions about either qualitative or quantitative forecasts, it would be useful to understand how the  Economy of Iran   works ( HINT : It's an historically driven economy not a Neoclassical Economy ). From the perspective of   Systems Theory,  the first step is to estimate the state variables (the measurement matrix for the Dynamic Components  state space model is presented in the Notes below). There are three state variables (estimated by Pr...

  The systemic effect of the  Iranian Revolution  was to eliminate cyclical behavior from the System.  Before the Revolution in in 1979, Iran was an unstable, cyclical economy, the cycles being created by Unemployment, Globalization and Environmental damage. After the Revolution, state-space cycles were eliminated. The difference between the two Phase Spaces seems to echo Emile Durkheim's distinction between  Mechanical and Organic solidarity   (see below). You can investigate the effect of stabilizing the Iranian Economy by running the IR_LM model ( here ). Be sure to set SHOCK = FALSE and uncomment the stability lines in the code. The phase Diagram for the period before the Revolution (see above) will look the same but now the movement in Phased Space is toward the center , that is, stable! Notes The IR_LM Measurement Model is: The first state variable (row of the Measurement Matrix,  IR1 ) describes overall growth in the Iranian Economy. The secon...