Geoscience Reference
In-Depth Information
of durable public goods (i.e. tangible and intangible infrastructure). Examples of
infrastructure are fundamental values, constitutions, scientific knowledge, transpor-
tation and communication networks. In general equilibrium theory infrastructure is
a mainly implicit, but always exogenously determined and stable stage on which the
economic games are played. A dynamic theory of the interdependent evolution of
the infrastructure and general economic equilibrium theory has been lacking.
The reason for the omission of a link between GET and infrastructure theory is
quite clear. The necessary mathematical foundation for such an interdependency
analysis did not exist before the 1970s. The first attempt to analyze catalytic and
other collective/public phenomena was by Rene´ Thom in his
Structural stability
and morphogenesis: an outline of a general theory of models
(
1989
). In this topic,
originally published in French in 1972, he showed how collective phenomena could
be modelled with singularity theory and applied to biological phenomena, such as
the simultaneous blooming of a certain species by the influence of the slowly rising
temperature, acting as a collective/public good.
Related to Thom's bifurcation theory is Synergetics, formulated by Hermann
Haken as a way of solving some hard dynamic, non-linear problems in physics
(Haken
1977
). Haken showed that system predictability can often be achieved by
subdividing dynamic processes according to their widely separated time scales. A
general equilibrium of the combined dynamic system then becomes a possibility, if
a few slowly changing variables are causally impacting a large collective of rapidly
changing variables.
The institutional and material infrastructure can be defined to be such a collec-
tively impacting (or public) variable moving on a qualitatively slower time scale
than the private goods allocated in the markets. Thus any economic entity is defined
to be an infrastructure if it is:
simultaneously used by many firms or households and
very durable, compared with other goods.
The following dynamic model of a market economy illustrates the power of
subdividing the variables of the economic system into widely different time scales.
The dynamics of the markets for ordinary goods is determined as in general
economic equilibrium theory by excess demand differential equations determining
the price trajectories:
dp
=
dt
¼
fp
ð
;
A
Þ
;
ð
5
:
12
Þ
where
p
a vector of prices of ordinary market goods including factor services (possi-
bly in different regions),
A
¼
¼
a vector of infrastructure accessible in different regions
The development of infrastructure (as e.g. represented by accessibility values)
can be represented by the equation:
