World Export Cycles on the Edge of Stability (World System, 1970-2100)

 

World1 Phase Space

 

World-System (1970-2100) Stable BAU Growth and Collapse Cycles in Italy

                

This page is UNDER CONSTRUCTION but you can study the graphic above and the State Space model outputs below. 

Notes

You can run the ITL20 Model in R-code (here). For more of my posts see Blog Roll: Italy, the Boiler Plate and the Introduction to State Space Models.

Questions

1. The ITL20 Model reaches a Steady-State Economy with a low level of Growth (IT1) and Emissions Unemployment (IT3) but a high level of Globalization-Unemployment (IT3). Would this Steady State be acceptable to the Political System?

Wikipedia Links

• Economy of Italy a highly developed social market economy. It is the third-largest national economy in the European Union, the 8th-largest economy in the world by nominal GDP, and the 12th-largest by PPP-adjusted GDP.
• Politics of Italy  conducted through a parliamentary republic with a multi-party system. Italy has been a democratic republic since 2 June 1946, when the monarchy was abolished by popular referendum and a constituent assembly, formed by the representatives of all the anti-fascist forces that contributed to the defeat of Nazi and Fascist forces during the liberation of Italy, was elected to draft a constitution, which was promulgated on 1 January 1948.
• History of Italy inhabited by humans since the Paleolithic. During antiquity, there were many peoples in the Italian peninsula, including Etruscans, Latins, Samnites, Umbri, Cisalpine Gauls, Greeks in Magna Graecia and others. Most significantly, Italy was the cradle of the Roman civilization.
• Geography of Italy includes the description of all the physical geographical elements of Italy. Italy, whose territory largely coincides with the homonymous geographical region, is located in southern Europe and comprises the long, boot-shaped Italian Peninsula crossed by the Apennines, the southern side of Alps, the large plain of the Po Valley and some islands including Sicily and Sardinia. 

ITL20 Model Measurement Matrix

IT1 = (Growth), IT2 = (KOF+HDI-LU-EF) a Globalization-Unemployment and IT3 = (LU-N-CO2-EG) an Emissions-Unemployment controller.

World-System (1950-2025) Edge of Chaos in Swirtzerland.

 

Nov 14, 2025 The New York Times reports (here) that "The United States and Switzerland said on Friday that they had reached an agreement to lower a punishing 39 percent tariff on Swiss goods to 15 percent..."

The agreement with the US was particularly important because: (1)  Switzerland has an unstable, cyclical relationship with the US and (2) There are no stable Geopolitical Alignments for Switzerland (even the BAU model, see the Notes below, requires stabilizing the Export-Employment controller).

This post looks specifically at the US and Germany (DE) economies and their impacts on the Swiss Economy.

Deterministic Chaos in socio-technical systems is a situation where a model of the system is deterministic but the future path of the system cannot be predicted because it is chaotic. I have always assumed that Chaos in social systems is so dysfunctional that it could not persist over time. Indeed, the "best" models (using the AIC), I have found, in macro social systems are often unstable but not chaotic. Here is an example for Switzerland.

Two of Switzerland's biggest trading partners are the US and Germany (DE). However, the CH_LM model driven by outputs from the USL20 and DE_LM models are on the Edge of Chaos (see the graphic above).  Here are the System Matrices for the two models:

and the Germany (DE) model:

One thing to notice is the large coefficient values. Values over 1.0 on the diagonal of the System Matrix indicate instability. Large values > 1.0 on the off-diagonal elements of the System Matrix indicate potential chaos.

I have pointed out in an earlier post (here) how the Trump II Administration is tinkering with a World Trading System it does not understand. The tinkering might involve pushing trading partners to the Edge of Chaos.

You can experiment with the CH_LM BAU model here.

Notes

ChatGPT

CH_LM Model

The CH_LM Measurement Matrix (see the Boiler Plate) has three components that explain 100% of the variance in the indicators: (1) the Overall Growth Component (93% of the variation), (2) The Export-Employment Controller (0.687 X - 0.618 HOURS, 7% of the variation), (3) The Urbanization Controller (0.547 U + 0.275 N - 0.566 HOURS - 0.446 X, >0% of the variation).

CH_LM System Matrix

The CH_LM System Matrix (see the Boiler Plate) shows that the system is unstable cyclical and the main source of instability is the Export-Employment Controller (F[2,2] = 1.02993562).

You can experiment with the CH_LM BAU model here.

World-System (1960-2150) Tech Cycles in France

 

In a prior post (here) and in prior posts on the French Economy (here), I have found that the French Economy (or at least my model of it) is approaching a Steady State. My hypothesis is that the approaching steady state might (in addition to a lot of other forces) be creating Political Instability. However, no one knows the Future and we have to entertain other hypotheses.

The current 2025 Noble Prize in Economics offers another hypothesis. History teaches us that new technologies and Creative Destruction will eventually break steady states and send Economic Systems on to new Attractor Paths. The hypothesis is the essential argument of Kondratiev Wave Theory (here) and is embraced by World-Systems Theory. An alternative forecast for France is that the Steady State will not happen due to La French TECH.

The graphic above plots two historical forms of French Technology: Productivity (TECHP) and Efficiency (TECHE) (see the Notes below). Notice that they are both cyclical (echoes of Schumpeter's Creative Destruction model which is also cyclical but unstable). Notice also that TECHP (productivity) peaks before TECHE (efficiency): once a productivity peak is reached, focus turns toward efficiency until all gains are exhausted.

Unfortunately for France, both of these technological peaks (at least in my model which is estimated from World Development Data) are going to be reached in the near future: (1) reinforcing the steady state or (2) creating more instability and a search for new technologies to put the economy on another growth path. Since we do not know the Future, nothing is guaranteed.

For more on Stable French Technology Cycles see the post here. Schumpeter's Creative Destruction model predicts unstable Creative Destruction cycles and the French Technology Cycles are stable.
 

Notes

FR TECH Measurement Models

The two types of Technological Change  (TECHP and TECHE) are explained in a post on Technology in the United Kingdom which also is a good comparison to the French Model. Essentially, TECHP is productivity (output per capita)  and TECHE is efficiency (for example, CO2 emissions relative to energy consumption).

World-System (1950-2000+) Unstable Cycles in the Iranian Economy

 

In prior blog postings, I have usually displayed only the first three state variables of a DCM (Dynamic Components Model). There are three reasons: (1) Typically, the first three state variables explain at least 90% of the variation in the underlying indicators. For example, in Iran (see the Measurement Matrix below in the Notes) the first three components (IR1, IR2, IR2) explain 98% of the variation in the underlying indicators. (2) Also, typically, the first state variable describes overall growth in the system and the next two state variables describe historical cycles and feedback controllers (here and here). And, (3) it is difficult to explain the dynamic path of state variables in more than three dimensions.

However, interesting dynamics are observed in the lower-order state variables. In the graphic above, the state space IR4, IR5 and IR6 is displayed. The graphic above shows the unstable, cyclical dynamic state-space interaction between IR4=(a Population-Resource controller), IR5=(an Environmental-Economy controller) and IR6=(Human Development-Employment Controller). Movement on the graph is from the center outward. 

The remaining three state variables, IR7-IR9 (graphed above), also have mild cyclical dynamics and are theoretically interesting (IR7=a Employment-Resources-Globalization Controller, IR8=An Emissions-Energy Controller and IR9=a Population-Employment Controller). They just explain an insignificant amount of variation.

Macrosocioeconomic systems are very complicated: everything is related to everything somewhere in the system. Policy measures that try to improve minor feedback controllers will have little overall impact on the system.

Notes

The first state variable (row of the Measurement Matrix, IR1) describes overall growth in the Iranian Economy. The second state variable, IR2, describes  Unemployment and Globalization, (IR2 = 0.9091 SL.UEM.TOTL.ZS + 0.335 KOF) and the third state variable, IR3, is an environmental-globalization feedback controller, (IR3 = 0.827 KOF - 0.3878 SL.UEM.TOTL.ZS - 0.258 EF - 0.217 EG.USE.COM.KT.OE), for unemployment, ecological footprint and energy use.

The next three state variables (rows of the Measurement Matrix) describe (1) a Population-Resource controller IR4 = (0.60541 N + 0.5104 HDI - 0.32993 GDP - 0.3036 EG -  0.2797 CO2 - 0.243 EF), (2) an Environmental-Economy controller IR5 = (0.731 EF + 0.21639 GDP - 0.5199 CO2, - 0.3020 EG - 0.21948 L) and (3) an Human Development-Employment Controller IR6 = (0.4050 HDI + 0.31822 GDP - 0.74027 N). Together, these feedback controllers only explain about 0.005% of the variation.

The final three state variables describe (1) an Employment-Resources-Globalization Controller IR7 = (0.64207 Q + 0.44614 L - 0.297 EF -0.2962 EG - 0.28808 KOF), (2) an Emissions-Energy Controller IR8 = (0.6428 CO2 + 0.247 EF  - 0.6843 EG), and (3) a Population-Employment Controller IR9 = (0.62266 N + 0.39963 GDP - 0.5687 HDI  0.2119 EG). Although these might be theoretically interesting controllers, they explain an insignificant amount of variation.

Further reading:

• Iranian Revolution a series of events that culminated in the overthrow of the Pahlavi dynasty in 1979.

• Strait of Hormuz a strait between the Persian Gulf and the Gulf of Oman. It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world's most strategically important choke points.

• Iran-Contra Affair a political scandal in the United States that centered on arms trafficking to Iran between 1981 and 1986, facilitated by senior officials of the Ronald Reagan administration

• Iran Nuclear Program one of the most scrutinized nuclear programs in the world, has sparked intense international concern.

• Pahlavi Iran the Iranian state under the rule of the Pahlavi dynasty. The Pahlavi dynasty was created in 1925 and lasted until 1979 when it was ousted as part of the Iranian Revolution, which ended the Iranian monarchy and established the Islamic Republic of Iran.

• Iran-Iraq War an armed conflict between Iran and Iraq that lasted from September 1980 to August 1988. Active hostilities began with the Iraqi invasion of Iran and lasted for nearly eight years, until the acceptance of United Nations Security Council Resolution 598 by both sides.

• Iranian Economy a mixed, centrally planned economy with a large public sector. It consists of hydrocarbon, agricultural and service sectors, in addition to manufacturing and financial services, with over 40 industries traded on the Tehran Stock Exchange.

Blog Roll:

• Stabilizing the Iranian Economy Easy but not easy!
  
• A Deep Dive into the Iranian State Space Cycles vs. Control
  
• The Iranian Revolution Still being worked out today.
  
• Will Israel and US Attacks Hurt the World-System? Yes
  
• How Does the Iranian Economy Work? Not like a Neoclassical, free-market economy.
  
• What was the Impact of the Iranian Revolution? Elimination of Cycles!
• Iranian Globalization and Unemployment Created the discontent that led to the Iranian Revolution.
• Iran as a Neoclassical Economy US Technological domination!

World-System (1960-2100) Stable French Technology Cycles

 

The 2025 Nobel Prize in Economics (here) was awarded for having explained the role of innovation and Creative Destruction in Sustained Economic Growth. Particularly interesting (to me) was the Aghion and Hewitt paper  A Model of Growth Through Creative Destruction, which won them part of the Prize. Does the 2025 Nobel Prize have anything to say about current French economic development and political instability?

I have two explicit models for technological change, one for Productivity change (TECHP) and another for Efficiency change (TECHE). The models are based on State Space indexes (see the Notes below) constructed using Principal Components Analysis (PCA). The Phase Space for the FR TECHE model is displayed above. The Phase Space for the FR TECHP model is displayed below.

Both models are cyclical and stable with periods of over a Century (see the Notes below). 

Over time, in the graphic above, the two types of Technology peak at different points in France. TECHP peaks first followed by TECHE. I other words, when productivity gains are exhausted, technology improvement turns toward efficiency. The problem for France is that both measures of technological change are about to go into decline after 2025 and not predicted to recover until after 2100 (at least in the models).

From my models, at least, it does not appear that Technological change will intervene to save France from an impending Steady State Economy and possibly continued Political instability.

You can experiment yourself with the FRL20 TECH Models models  and compare the outputs to the unstable Schumpeter Creative Destruction Model.

Notes

Blog Roll for FRL20 models and Theory Models:

• FRL20 Model
• FRL20 TECH Models
• Schumpeter Creative Destruction Model

Measurement Models

Modes

System Matrices