2. Currency Counter-Currents in Production and Consumption (ECONP&C)

In the model ECONP&C, relationships of circulating money and generating real value from resources are studied. Economic production generates products from environmental resources and human goods and services. These are sold to consumers who use the products to generate services that they sell to the producers. As Figure IV-2a shows, the resources are processed to the right as production and back as a feedback of services to the left, interacting in the production process. The energy source is renewable inflow, limited at its source to a regular inflow. Thus, the model is appropriate for a segment of an agrarian economy before the industrial revolution, after which the economy has been mainly running on fuels and other nonrenewable resources.

Money that is used to buy and sell products and goods and services flows as a circular counter-current in the opposite direction. As shown by the diamond-shaped symbols, the flow of products and goods and services are linked to the flow of money by the prices. In the situation shown in Figure IV-2 the prices are determined by the larger systems markets outside this system's boundary.

The working capital in the bank accounts of the producers and consumers are the small tanks indicated with $ signs. The spending of money in this model is proportional to the money in the bank accounts-the more money, the more spending.

If the initial conditions are started with small storages of products (Q) or consumer assets (C), simulation shows a growth as money goes round and round (Figure IV-2b). If the money supply (TM) is not, changed, the same money buys more as production increases until the growth is limited by the source.


An example is agricultural production of food, which consumers in the city use to make the machinery, pesticides, and fertilizer needed for agricultural production.

"What If" Experimental Problems

  1. In 1815 dust from a volcanic explosion shielded the sun and in that summer there were crop failures in New England with frost all summer. What is the effect of reducing the source input by half? If prices were held constant, what would the money circulation have been? If prices went up because of scarcity, what would you call the condition?

  2. What is the effect of increasing the money supply TM, without changing the resource availability or the prices?

  3. Suppose the price of human services and labor were increased, other things being the same? What is the effect on stored products and consumer assets?


Howard T. Odum* and Elisabeth C. Odum+
* Dept. of Environmental Engineering Sciences, UF
+ Santa Fe Community College, Gainesville

Center for Environmental Policy, 424 Black Hall
University of Florida, Gainesville, FL, 32611
Copyright 1994

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