MODELLING (SIMULATION) OF ECONOMIC REGULATIONS

MODELLING (SIMULATION) OF ECONOMIC REGULATIONS

1. Principle of Modelling (Simulation)

Economics may be presented in the form of corroborated rules. Economics may be defined as science consisting of economic principles, laws, features, criteria, limitations, axioms, and etc. Each listed entity may be divided into categories.

Categories (category - instructions) - theoretical concepts meaning the most important aspects of restoration of reality. Categories are forms giving the theoretical meaning to practical experience. Categories give names to economic phenomena. Categories are presented and analysed in textbooks, reference books, and encyclopedias .

Categories are interconnected since the economic phenomena reflected by the categories are mutually connected.

There are numerous relations among the categories. These relations are like a network or a tree since one category is connected with several other categories, whereas the latter, in their own turn, are connected with the other categories. We may analyze the category "investment" as an example. The term "investments" is defined as the putting of capital into an enterprise. Capital is everything that has been created by the labour of people and is being used for the manufacture of a final product . enterprise is the production or commercial economic entity. Further, the following categories should be defined : labour, benefit, a product, production, commerce, and economy. Then the categories included in the above mentioned categories should be defined.

The above example shows that the definition of one category produces a large number other categories in a way of levels. The multi-level system of categories is formed.

It is actual to analyze the most important categories. The categories used in economic texts may be considered as the most important. Usually only a small group of words is used. After analyzing 10 million German words, the German stenographer S. Keding has established that 15 words which are most frequently used form 25% of a text. The category "labour" which is on the 12th place in the Lithuanian frequency dictionary has been used 1759 times in the text analyzed. Other frequently used categories include: economy, land, production, a worker, an enterprise, and a plan.

How many categories are known? The most comprehensive dictionaries of economic terms present about 75,000 categories. Relationship among the number of economic phenomena (categories) may be established by means of combinatorial formulas. We will obtain the number which may be compared with the possible number of combinations on a chess-board (10 ¹²⁰). To obtain the rational economic corroborated rule out of the combination of categories it is necessary to consider the combination by 626u2017g the appropriate methods used in the economic theories of sets and probability. Besides, sometimes the combination of methods -an algorithm must be used. The rational combinations of categories express compound categories, principles, laws, definitions, features, and etc. Some combinations of categories do not form rational relationship. This indicates that there is direct relationship among the categories analyzed.

Since the number of variants is so 1arge, it seems that the problem is so hopeless that there is no sense even to start analysing it. Nevertheless, it is necessary to take into account that the most important relations are binary, in other words, the couple relationship categories. Having binary relationship, all other relations are easily modeled.

As for today some relations were considered and declared. There are thousands of sources, analysing the problematic of categories [C 1-9]6. Aristotle was the first who brought to light the problematic of categories. He noticed that conceptions may be sorted according to aspects by which they describe and characterise the phenomena of reality . Aristotle pointed out several such aspects : essences, quantities, qualities, relationship, and etc. They are not replaced by each other or by one of them which is the most general. Thus, they are the highest relations or categories which form the basis of science used to explain reality. Aristotle has not made consistent conclusions about the structure of categories and the origin thereof. Nevertheless, he pointed out the cognitive sense of categories and underlined the thought about the necessity of systematising these categories, which is very important for science. The problematic of categories was analysed by such famous scientists as: E . Huserl, B . Rasel, D . Pospelov, and A.Einstein. The latter said, ''I doubt whether it is possible to understand the miracle of thinking." This thought is confirmed by the principle of " a black box" applied in cybernetics according to which only input information and the results obtained are known in advance. The way and means by which these results are received stay unknown. Only input and resulting information is considered. The professor Dmitriev is afraid that penetration into "the black box" - the intellect of a human being may be dangerous since consequences are foreseen with difficulty.

Earlier we stated that categories give names to economic phenomena. These phenomena are interconnected. Search for relations and modelling lead to certain results. The result is corroborated rules. Rules may be and must be classified. The types of well known economic corroborated rules include. a principle, a law a criterion, a limit, a feature, a definition, an axiom, a postulate, a compound category, a dogma, a canon . Corroborated rules also are classified into theses and hypotheses . The thesis is a proved rule, whereas the hypothesis is the mentioned corroborated rule.

Analysing any economic text more attentively, we may find the above listed types of economic corroborated rules. For example after analysing the text of the lecture "The Forms of Organising Business" it has been established that it includes: 47 laws, 37 definitions, 17 principles, 29 features, 24 axioms, 18 canons, 10 postulates, and 8 criteria. Facts, formulas, diagrams, paradoxes, pre-conditions, conclusions have been found in other economic texts.

Methods facilitate the establishment of relationship among economic phenomena. The dialectic method is total. It has been applied since the times of Platoon. The compound elements of the dialectic method are: observation, analysis, synthesis, induction, deduction, an experiment, abstraction, and verification. The genetic methods of "branches and limits" and other methods are also applied.

Which methods are used mostly frequent while modelling corroborated rules? The revision of 321 relations shows that analysis has been used in 92 events, the genetic method - in 78 events, observation - 42 events, deduction - in 16 events, and synthesis - in 15 events and so on.

The method is formed of categories, principles, laws ... That is why the application of known methods cause the modelling of new ones. The list of methods known to science today may be considered as final.

Let us consider the way of establishment of the most important binary relationship . Let us take two categories: A and B . Let us rewrite the definitions thereof from a reference book, a textbook, and an encyclopedia. Then take from the list of methods the first method and search for relationship between A and B by means of this method. If relationship is established, establish the type of relationship . Later on take the next method and search for relationship between A and B by means of this method. Again, if relationship is found, establish the type thereof. This may be the relationship of other type established between the same categories.

It is possible that relationship is not established by taking every time one method only and that relationship established is fixed only after applying the composition of several methods.

Let us consider a certain example. 5 elect several categories by the method of randomness and establish relationship between them. Take four categories used in economics and write down the definitions thereof.

Inflation - the overflow of circulating money channels by paper money over the real

requirements of economy, which leads to depreciation.

Amortisation - the gradual deference of the cost of fixed assets to the products manufactured by means of these assets according to the level of physical and moral wear and tear of the fixed assets .

Capital - everything that has been created by the labour of people and is used for the purposes of creation of goods and services.

Utility - the social-economic principle according to which all public relations are considered from the point of view of usefulness thereof to use these relations as means to reach any other aim.

Let us model relationship among these four economic phenomena. At first categories should be analysed separately. Observe how the economic phenomenon defined by the given category changes in time and space. For example, inflation in the course of development of history has a tendency to increase and to be stabilised, sometimes it disappears. Thus, the corroborated rule is formulated. "inflation is changed in time." The type of this corroborated rule is a feature. The phenomena was considered by the method of observation. After analysing the category "capital", it is established that "capital increases in time." This law has been established by the method of analysis.

After analysing the categories separately, we start analysing the couple relationship of categories. After researching inflation and amortisation by the genetic method, we establish that variation in amortisation may cause changes in inflation. If amortisation becomes slower, out-of-date equipment is accumulated, which causes the manufacture of smaller quantity of goods of lower quality, whereas the amount of money in circulation is not reduced. This leads to increase in inflation. The law is formulated : "Slowing down in amortisation increases inflation". The genetic method has been used.

The mentioned and other results of modelling are presented in the table.

After analysing 15 combinations? we have received a number of laws? principles? and features. We may see that binary  (couple) relationship is the most important. Models consisting of three or a larger number of compound concepts are modelled easier if we have established couple relationship.

In economics? it is important to find initial categories which may be used to model economic corroborated rules gradually joining to them other categories. To find initial categories you should analyse categories which are explained by the minimal number of other categories.

The simulation (modelling) and identification of economic corroborated rules by means of a computer

A man models economic corroborated rules by means of a computer. The computer may find the main compositions to systematise the tremendous number thereof, quickly find necessary information, group corroborated rules, register and analyse them, and store information. However,  the creation of a suitable program is quite a long and hard process. Corroborated rules which are regular and stable (are not variable) in real life may be simulated by a computer. A computer cannot apply the observation, verification, and genetic methods since it is only capable to analyse available information. Information changes very quickly, and for this reason the results obtained are not accurate.

The following distribution of works is possible : a man models separate (single) and couple compositions. The compositions consisting of three and a larger number of compounds are simulated by a computer.

The identification of corroborated rules means that the types of corroborated rules taken out of the known economic text must be identified : laws, principles, features, and so on. It is quite easy to perform this work without using a computer provided that the volume of work is not large . However sometimes some doubts arise: to which type should a certain corroborated, rule be attributed? Doubts are caused by the insufficiently accurate and simple definition of types of corroborated rules.

While computerising the identification of economic corroborated rules, it is important to accurately define the types of economic corroborated rules, then make algorithms and programs for the identification of each type of a corroborated rule.

Identification enables to assess an economic text. The text the corroborated rules of which are presented in a certain order is acceptable for a reader. Consistent presentation facilitates the understanding of a text.

Practical application of simulation of economic corroborated rules

The theoretical possibility of economic corroborated rules has been proved in the previous paragraphs of the manual. The origin of the idea has been presented the concept has been formulated the principles and examples for the formation of levels of economic categories have been revealed, the methods for modelling economic corroborated rules and the possibility of using a computer for simulation of economic corroborated rules have been described. Now a question, "What for do we need all these things?" is arisen. Is the new method for modelling economic texts necessary? You know that a large number of economic texts which have been accumulated in libraries were created and written without using this theory .

I think that this method is necessary and I will try to explain why . Available literature comprising economic themes is incoherent, not systematised, and full of inner contradictions. Both a dilettante and a person who may be considered as a professional in the sphere of economics have difficulties in understanding this literature.

Compiling an economic dictionary

We have a large number of economic dictionaries . However most dictionaries have been complied in compliance with the same criterion - the categories are classified in the alphabetical order. It is true that often dictionaries are compiled according to the criterion of frequency of use.

Dictionaries compiled according to the aggregation level of economic categories are not available in the world until now . The system of levels of economic categories presented in Section 2 of this manual is the first attempt to present the dictionary compiled by a new principle. This dictionary is small. If we want to compile a dictionary of economic categories of a larger volume, it is necessary.

a) to draw the list of initial economic categories on the basis of dictionaries compiled according to the frequency of use of categories;

b) to create the system of levels of categories for each mentioned category;

c) to improve the system created by iterations until the perfect list of categories without gaps and with systematised point of view to economics is obtained.

It is necessary to classify them according to the aggregation level by assessing the number of levels of categories used in the text. This approach is necessary for the available dictionaries compiled and modelled by other authors. If texts are modelled in compliance with the method of this manual, the texts classified according to the aggregation level are compiled.

In real life, there is a lot of economic problems which may be settled by using available economic literature. Using the methods for modelling the economic corroborated rules, we obtained the optimal solution described on the required aggregation level, modelled by the problematic situation. The wide sphere of application of the method for modelling economic corroborated rules is the educational process. The consistent transition from the conventional public language to the most complex economic concepts and the modelling of relationship among these concepts leads to the available level of well understandable economic science and noticed tendencies of economic development.

The possibilities of practical application of modelling of economic corroborated rules will be described in detail below. The application of methods for modelling economic corroborated rules for compiling an economic dictionary, an economic text, for reviewing and modifying a text will be shown. The application of the method of modelling in the studying process: the preparation of homework's, course works, graduating works and the modelling of the studying process will be considered as well as the modelling of a non-economic text will be considered.

As it was shown in Section 2 of the manual, the system of levels of economic categories may be formed on the basis of different criteria. The variant of the system of levels will be selected depending on the sphere of application.

Thus, the practical application of philosophic education and computer science in the sphere of economics has led to the method for the information modelling of economic corroborated rules and has enabled to apply it in practical economic activities .

Creation of an economic text

The theoretical aspect of creation of an economic text has been analysed in Section 3 of the manual. In this Section., the text which includes the couple relationship of economic categories was presented . The text presented here includes triple relationship.

"If inflation processes are noticeable in the market, dividends increase. Inflation in the market makes shares more expensive. If economics declines, inflation will increase, whereas a debt will comparatively decrease. Again., if economics declines, inflation and taxes will increase. Utility stimulates inflation., which is the reason of depreciation of debentures. Again., utility stimulates inflation, which, in its turn, depreciates capital. Inflation makes investment unprofitable. Inflation decreases the number of deposits and investments."

From this text., the relationship of inflation with certain economic phenomena and the type of this relationship may be seen. If the sequence of levels of categories was assessed, the text would be better understandable. The quality of the text will be analysed depending on the sequence of levels of categories in the following sections.

The author used the method for modelling of economic corroborated rules for compiling different economic texts. The Law on State-Owned Enterprises was prepared by the working group formed by the Ministry of Economics of the Republic of Lithuania and the Institute of Privatisation. The author was a member of the mentioned group. The mentioned Institute prepared the material "The Analysis of Activities of Foreign Enterprises in Lithuania" [79] for the Government of Lithuania. The author of this manual was among the authors of the mentioned material. The author also used the method for modelling economic corroborated rules in compiling other economic texts.

To compile an economic text the system of levels of economic categories must be used. At first the abstract variant of the text consisting of O-level categories is modelled. Then the creator of the text must go to l-level categories 2-level categories, and so on.

. . . their definitions;

d) to assess the definitions of established categories and check them in the respect of economics the science of law and the science of language;

e) to form a dictionary as the system of levels of economic categories and approve it as the standard system of economic conceptions used in Lithuania.

Thus., the idea of the project of the dictionary is the formation of the system of levels of economic conceptions. The application of such a system would facilitate search for relationship among economic phenomena since the volume of search would decrease. The method for compiling the dictionary is the optimisation of definitions of economic categories. The proposed way for compiling of the dictionary. the operator who is a professional both in the sphere of computer science and economics will input into a computer the category to be analysed and all economic categories which are required to analysis . Then the person will optimise this fragment by iterations and as a result will establish the number of the level of the category being analysed. The result will be checked by a lawyer and a linguist.

Reviewing an economic text

The economic text modelled by any author may be assessed by applying the system of level s of economic categories. With this purpose, the economic categories presented in the text must be underlined. Then the levels of economic categories must be established. The text must be considered as good if there are no large leaps between levels and the levels of categories are presented evenly. Then the text will be presented and the numbers of levels of categories included in the text according to the system of compact level s of economic categories.

The origin of money (3) stimulates the further development of forms of products (1) and exchange (1). After inventing money (3), all products (1) are compared to money (3), the cost (0) of each product (1) is expressed in money (3). In this way the price (4) of the product (1) is formed. The price (4) is the monetary (3) expression of the cost (0) of the product (1). Since the cost (0) of products (1) is expressed by comparing in the process (0) of exchange (1), change in exchange (1) proportions on all the stages of development of the form of the cost (0), may cause deviations from real change in the cost (0) of products (1). You know that exchange (1) proportions also depend on the cost (0) of products (1) in the form of the relative cost (0) and on the cost (0) of the equivalent (2) of a product (1). The origin of the price (4) reflects the further development of contradictions connected with this. The terms of exchange (1) of each product (1) were fully dependable on circumstances which determined the appropriate commercial (2) deal (1) until the origin of universal equivalent (2). After the origin of money (3) and prices (4), the cost (0) of products (1) being exchanged depended both on circumstances under which the certain deal is made (1) and the general state of production (0) and the market (2). Under conditions when the market (2) aims the flows of products (1) and resources (1) all the participants of economic activities (1) are orientated to the supply of products (1) and services (0). Simultaneously, products (0) and resources (1) in the market (2) have monetary (3) assessment, which stimulates consumers (1) economically use the products (0) and manufactures (1) economically use resources (1).

Conclusion

The first proposition: 3 1 1 3 1 3 1 03 1443 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 204

The second proposition: 2 1 1 2 1 34 1 0 1 02

The third proposition: 21 1 1 100 123 1 0 1 1

Critical assessment of the text

The text is not presented in a due order. A large number of leaps in levels are being noticed. The text is inconsistent. The thoughts are not presented evenly. The text must be reorganised. The text is about the origin of and change in the price. The thoughts presented are not easily understandable.

Reorganization of the economic text

After reviewing the text and establishing that it does not meet the requirements of evenness of levels, it must be reorganised, which means that economic categories must be changed so that there would be no large leap s in the level s of the text.

After reorganising the text reviewed in the previous section, the new text has been compiled.

NEW  TEXT

The origin of the universal equivalent (2) facilitates the further development of the forms of exchange (1) of products (1). After the origin of the universal equivalent (2), all products (1) are compared with it, whereas the volume of work (0) necessary for manufacturing the product (1) is expressed by the universal equivalent (2). In this way products take the universal equivalent (2) product (1) cost (0) expression. Since the cost (0) of products (1) is expressed by comparing it in the process of exchange (1), the deviation of exchange (1) proportions on all the stages of development of the form of the cost (0) may cause deviations from the real change in the cost (0) of products (1). You know that exchange (1) proportions depend both on the cost (0) of products (1) in the form of the relative cost (0) and on the volume of work (0) required for the manufacture of the product (1). The origin of the universal equivalent (2) product (1) cost (0) reflects the further development of contradictions connected with this. The terms of exchange (1) of each product (1) were fully dependable on circumstances which determined the appropriate commercial (2) deal (1) until the origin of universal equivalent (2) . After the origin of the universal equivalent (2) and the universal equivalent product (1) costs (0), the exchange product (1) cost (0) became depending both on circumstances under which the certain deal (1) is made and the general state of the sphere of production (0) and product (0) exchange (1) . Under conditions when the market aims the flows of products and resources all the participants of economic activities are orientated to the supply of products and services. Simultaneously, products and resources in the market have universal equivalent assessment, which stimulates consumers economically use the products and manufactures economically use resources.

Conclusion. The levels of economic categories as for propositions.

The first proposition: 21 1210121210101 1010101001210

The second proposition: 21 1 1 121 0 1 0 1 00 1

The third proposition: 21 1 1 0 1 1221 1 1 1

We may see that categories in the new text are presented more evenly .

Another example of reviewing - the Economic Part of the Constitution of the Republic of Lithuania. The result - quite a consistent text from the point of view of the system of levels of economic categories .

One more example . The texts compiled by two laureates of the Nobel Prize - P . Samuelson [75] and F. Fon Hajoko [76] . The aggregated compact system of levels of economic categories did not find differences: both texts were sufficiently even and consistent. After using the system of levels of economic categories formed of 500 categories, it was established that the text of P. Samuelson has better quality than the text of F . Fon Hajoko.

Practical application of a computer for the simulation of the text

The list of auxiliary words was made by means of a computer while reorganising the text. To simplify the text economic categories have been replaced by non-economic categories the meaning of which corresponds to economic categories. For example, the word ''investment'' has been replaced by the word "idejimas".

The file was made for the simulation of economic corroborated rules by a computer. The basis of this file is the program "Cardfile'' operating in WINDOWS environment.

The program the result of operation of which is all the possible combinations of economic categories has been developed. This program facilitates the process of simulation since a programmer does not fear that any relationship (combination) may be lost .

There is sense to input into a computer the types of economic corroborated rules and the description of methods of research. This would save ...

While reorganising the texts, the textbook "The Principles of the Theory of Economics" has been prepared. The textbook was prepared by the resolution of the meeting of the Department of Business Economics of the Vilnius Technical University on June 22, 1995. This project was approved by the Department of Business Management and the Board of the Vilnius Technical University. The project was supported by the Support Foundation of Lithuanian Scientists. The textbook was prepared by the group of tutors and students of the Department of Business Management .

Simulation in the process of studying

The result of simulation of economic corroborated rules - principles laws, features, criteria, limitations, axioms, and etc . On the early stages of development of science, the establishment of laws and principles was considered as significant achievement. Today after using the, methods for modelling economic corroborated rules, a student is capable to easily simulate principles, laws and etc. Which students are able of doing this?

They are the students of the Department of Business Management, the Department of Environmental Engineering, and the Department of Civil Engineering of the Vilnius Technical University, the students of the Lithuanian Academy of Law, the students of the private school, 'Akelan'. Among those who use this method are also the pupils of the Alytus Higher Technical school and the Buividiskes Higher Agricultural School.

The modelling (simulation, of economic corroborated rules is studied during lectures practical exercises, homework's, tests, course and graduating works. Post-graduates model economic corroborated rules. The post-graduates who are studying with the purpose to defend a scientific work apply the method in their works.

The modelling of economic corroborated rules is included in the schedules of studies . This subject has been included into the curriculum's of the theory of economics, business economics and finance, and civil engineering economics prepared by the Department of Business Economics.

. . . time and would help in the process of modelling (simulation) . It is possible to separately write the typical examples of types of corroborated rules and a simple example of simulation (modelling) of economic corroborated rules.

While forming the system of levels of economic categories, there is no necessity to repeatedly select economic categories and the definitions thereof on the second and further iterations. While optimising the definition of a category, it is convenient to mark words and copy them to a new place. Then the user should write correctly the endings of words and tenses of verbs. The opportunity to reorganise the text by means of a computer is obvious.

Simulation in the spheres which differ from economics

Until now we were analysing the modelling (simulation) of economic corroborated rules. Is it possible to model the corroborated rules of management, law, and politology? These possibilities are absolutely real. The economic dictionary should be replaced by the dictionary of categories of other subjects. The dictionary should be reorganised into the system of levels of categories. The methods of modelling (simulation) are the same as for economic modelling (simulation). The results of modelling are analogous to those in economic modelling: principles, laws, categories, definitions, features, and etc.

Thus, the concept of modelling (simulation) is suitable for different spheres of application. This concept may be interesting for the representatives of mass media since the latter are engaged in work connected with texts.

After reviewing the above presented material, the following conclusions should be made.

The well-organised library of economic texts may be formed by applying the method for modelling economic corroborated rules. This library would contain the economic dictionary of a new type compiled according to the level s of economic categories, the economic texts classified according to the levels of categories used in them, the methods of modelling, and the types of economic corroborated rules. The library of economic texts should be formed of newly modelled (simulated) or lower written, reviewed, and reorganised texts.

The library may be formed only by means of a computer.

The modelling (simulation) of economic corroborated rules may be widely applied in the process of studying of both economics and other subjects .