Modeling Monopoly Money in Minsky

The Changes

Discrete to Continuous Time

The first change was required by the software, and it was changing the model from discrete time to continuous time. That is, originally, the model had time coming in discrete chunks, starting in period 1, then moving to period 2, then 3, and so on, where maybe we suppose that each of these corresponds to, say, one month or one quarter. But Professor Keen has not built an option for discrete time into Minsky. (I asked him about this, and he said that he believes that continuous time models are better and that economists should switch over, so this is his way of nudging people in that direction. FWIW I don’t have strong feelings about discrete time vs. continuous time.)

Right-Siding Up!

I view my original paper as serving a number of functions. For one, it helps formalize long-time MMT insights. Another, it serves the social function of getting critics of MMT off our backs — I‘ve lost count of how many times I’ve had this interactions: somebody says to me “where’s your model?!” then I say “here’s one,” and then I never hear from them again. That’s at least been nice for demonstrating that most people demanding models never seriously intended to spend the time to read one.

Godley Tables

One feature of Minsky is its ability to keep track of accounting for you, through something called a Godley Table. In my little toy model, there’s not much accounting to lose track of, but this is handy nonetheless, as it generates equations for you automatically. The symbols look like this:

Scaling imbalance terms

Finally, another technical change from the paper is that I decided to scale the market-imbalance terms that make up the “pressure” indicator. I do this by dividing them through by quantity -supplied. This makes each term a measure of the imbalance as a percent of the market. This is a subtle change, but makes the model more sensibly scale-invariant: eg. if the market is in shortage by 2 units, it seems like prices should go up faster if the total size of the market is 10 units rather than 10,000 units.

The Model

Ok, technical details aside, let’s at last get to the results. Here’s a zoomed out shot of the whole thing:

Conclusion and Review

All in all, I found the software to be quite easy to use, although it’s a bit rough around the edges. The wiring interface makes it really easy to start building models very quickly, and Steve’s presentation videos where he basically improvises entire models on-the-fly are a testament to this.

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