What is the Goodwin model?

The Goodwin model is a macroeconomic theory developed by US economist Richard Goodwin. The model developed in 1967 in teaching the University of Cambridge in the UK and predicts cycles of economic activities based on the entry values ​​of employment and productivity levels for work and capital investment. The model has derivatives from the theories of Marxist class combat theories, as well as the behavior of predatory prey in nature and deals with cycles that occur in economies because employment and wage factors fluctuate.

The principles of the Goodwin are based on a non -linear approach to zero sum growth. In principle, this states that whatever aspect of the economy or other element of the system will receive, the loss of the same value will equal it elsewhere to prevent instability and growth or decline in the system overall. This is the principle on which the Marxian economy is established, where the value and impact of the work, the value and influence of the capitalists who finance, reduce it, and vice versa. Goodwin NavRHL that simple compromises, such as this, existed as a natural course of economic cycles. The lower, for example, the level of unemployment, the more workers would affect the required higher wages, which would reduce the profit and control of capitalists over work and reduce the motivation to extend business.

These compromises in the business cycle theory are also reflected in Phillips curve used by the Goodwin for its calculations designed by New Zealand economist William Phillips in 1958. Phillips curve states that there is a direct relationship between unemployment and inflation. Like the Goodwin model itself, the principles of a business cycle proposed by a Phillips curve tend to be more valid in the short term than in the long term and long -term and in the long run more valid theoretically than in practice.

Goodwin's TEorie also drew economic growth from the Harrod-Domar model as a method to get for these equalizing forces in the cycle. Sir Roy F. Harrod and Evsey Domar suggested in 1946 that growing economies are not inherently balanced, but increasing the quantity and quality of production, as external capital investment is disrupted to disrupt normal behavior. Most economic cycles that are considered idealistically balanced and stable is in fact the reason for the locking of many nations into poverty scientists, where savings, capital investments and technological innovations are low.

The weakness of the Goodwin's approach to the system's behavior is the fact that it clearly defines the contradictory elements of the system as an inseparable antagonistic. The Goodwin class struggle, such as Marxian economy or prey, assumes that two primary elements of the system are fighting against each other in a predictable environment of bezjina's complex influences. Earnings for earnings are opposed to capitalisTical investors or predators against prey. Although these theories have some validity in terms of how complex systems interact, they tend to decompose when alleviating factors or invisible effects change the behavior of primary elements in the system.

One good example of where the Goodwin and the others that like, could not predict economic trends, are in recent worldwide economic decline that has occurred since 2008 as a result of speculation on the housing market and for other reasons. This economic decline has led to a widespread increase in the unemployment rate in many industrial countries, extending the capitalist interests of cheaper and abundant work to expand business. Despite this occasion, since 2011, capitalists did not respond by increasing hiring and instead reduced capital investments at a time that would seem ideal for growth in terms of pool.