THE ANALYSIS OF ECONOMIC SYSTEMS

RICHARD {STONE
Cambridge University - Cambridge - Great Britain

MODELLING ECONOMIC SYSTEMS

t. THE BACKGROUND

It has long been a commonplace that an economy is a
system, an exceedingly complex probabilistic system. According
 to the classical theory, the information flowing in this
system consists of price signals. Constrained principally by
the law and public opinion on the one hand and by the state
of technology on the other, individuals and groups respond
to these signals mainly in terms of self-interest. First, the productive
 part of the system produces as efficiently as possible
what the consuming part wants to consume. Second, in every
part of the system strong tendencies exist to check any departure
 from equilibrium. Third, not only is every firm efficiently
operated but new ideas and inventions are adopted as soon
as they become profitable and so the standard of living grows
as fast as human ingenuity can make it. In other words, the
system is efficient, stable and progressive. It gives the maximum

1 Stone - pag. I