Macroeconomics–How our social system works

Project aims:

The subject of theoretical macroeconomics has been deliberately confused in the past so that it is difficult to properly and fully comprehend. By arranging the parts of it (or entities) in a simple model (according to systems engineering methods) and showing the various relationships between them (in terms of money and goods reciprocal flows) a newcomer to this subject can be helped to obtain a clear picture about a) what it is and b) how it works.


This is intended to provide a great improvement on past methods of presentation of this subject. Models used in the past are either too complex to understand or too simple to include enough of the "big-picture". This unique model is the first to include Adam Smith's 3 factors of production (see his "Wealth of Nations" 1767) namely Land, Labour and Durable Capital Goods.

Summary of activity:

I worked out the theory and used it to construct the model. The model may be expressed in a number of ways, two are shown in the associated paper, a diagram and a mechanical interpretation. Associated but not shown are a set of equations and a matrix (from an idea by W. Leontief).

Evaluation approach:

See above. It is the first way that this subject has been properly presented in a logical scientific (engineering) manner. This means that it should have a lot of use for teaching some of the basics of this subject and it avoids the past confusion.

What went well:

1. My analysis leading to what is presented. A lot of ideas are contained in a relatively few simple presented facts, which are essential. These include two tables of data. A longer discussion about them is in my book, yet to be published.

2. Use of Occam's Razor, to eliminate anything that is unnecessary.

3. The development and construction of the model, see photographs at end of attached paper.

What was learned:

1. How easy it is when you know how!

2. A good way for students to get a grasp of a confusing subject.

3. The need for more development in order to explain to more advanced students about the decision-making which must follow.

Top tips and advice for others

1. Try it and compare it with past methods for explaining the same thing!

2. This should become standard material on all courses that are aimed at teaching macroeconomics in theory, for later use in the practical applications.

3. Students who wish to progress further will need to see my book on the subject. Although this book is complete I have yet to find a publisher, but I am willing to share it with people who are seriously interested and who are studying this at college or university as well as teachers.

About the contributor

David Harold Chester
Retired from engineering, writer

I am concerned about how badly the subject of macroeconomics is explained to students. About 20 years ago I decided to work it out for myself in a logical way, for understanding about how our social s…

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3 Responses to Macroeconomics–How our social system works

  1. Macrocompassion says:

    I had to include the two photographs independently because the paper was too long with them. It looks good to me!

    Of course macroeconomics normally falls under the heading of an inexact science, if that. This what my work is all about, to introduce it as an almost exact science. Unfortunately there are economics experts who claim that their subject is already scientific, to which I suggest they read an essay by Nobel Prize Lauriate Richard P. Feynman called “Cargo Cult Science”, which differentiates between the pseudo and the exact forms. It is in his book “The Pleasures of Finding Things Out”.

  2. Macrocompassion says:

    ORGANISER: The paper and three pictures seem to have got lost although they were sent with the rest. Please include them or get back to me.

  3. Macrocompassion says:

    I am pleased to report that the three photographs and the diagram have now been added to the FLICKER series with this user name Macrocompassion. In order to properly appreciate the diagram it will need to be enlarged.

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