Economic Computation and SFEcon Model 0

Neoclassical theory holds that economic order and stability owe to a spontaneous tendency toward general optimality. Formal descriptions of this tendency are variously subsumed as the ‘economic calculation’ (or ‘socialist computation’ or ‘Vienna’) problem, which is presumably complicated beyond any possibility of solution. This paper, with its related desk-top prototypes, are presented as counterexamples to the non-computability premise. Together they demonstrate a general, international I/O structure’s advance through all the chaotic physical states and disequilibrium prices leading to Pareto optimality. Stated in the familiar terminology of DSGE modeling, the SFEcon algorithm maximizes value subject to the constraint of mass being conserved. Conservation of mass is imposed by loci of technical indifference that are everywhere expressive of diminishing marginal utility. SFEcon models emulate the continuous building-up and working-off of physical assets via ordinary engineering dynamics. Their steady-states are defined by any two assets having the same marginal rates of technical substitution in every sector. Acceptance of a solved Vienna problem is expected to open new orders of model building based on an underlying potential for physical optimality. For example, ever more sophisticated models of financial control can be compared in terms of the efficiency and stability they confer on the physical processes by which an economy responds to stimuli.