Exploring stability and other fundamentals in a simple economy model

de la Fonteijne, Marcel R. (2011): Exploring stability and other fundamentals in a simple economy model.

Abstract

In this essay I will show you, from a theoretical point of view, the connection between sustainability, stability, welfare and maximum profit in real business cycles. In a simple one sector Cobb-Douglas economy I investigate the nature of economics. Attention is given to system stability, sustainability, unemployment, maximum profit conditions and consumer utility functions in real business cycles. As a result, I conclude that in general the goals of the actors in the economic field are not serving the mutual interest of society as a whole. E.g. maximum consumer utility does not coincide with maximum producer profit unless their profit is zero when we require also full employment in equilibrium. Furthermore, we show that even the simplest economy model can be intrinsically unstable. An odd result worthwhile further investigation.

• Item Type: MPRA Paper
• Language: English
• Keywords: sustainability, stability, utility function, maximum profit, real business cycle
• Subjects: A - General Economics and Teaching > A1 - General Economics > A10 - General; C - Mathematical and Quantitative Methods > C0 - General > C00 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20 - General

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