Andrew Linton — On Loose definitions of Stock Flow Consistency

No DGSE models cannot be called Stock-Flow Consistent.

A correctly specified closed mathematical model will only have a ‘netting’ of flows to zero in one case – equilibrium. In that case you have all stocks no flows – but it cannot handle any out of equilibrium case of its time path – the real world. Because orthodox Neoclassical models are not defined in strict accounting terms – as a balance sheet of assets and liabilities that are unable to model consistency of relations that are defined as assets and liabilities, simple things like assets, debt and money. Crude attempts to overcome this – such as measuring in flows and outflows to a blobby body such as K the stock of capital have irresolvable issues of dimensionality through over over-aggregation.…

Decisions, Decisions, Decisions

On Loose definitions of Stock Flow Consistency

Andrew Linton