Social System Historical Modeling of Western Economies and its Implications for Eastern Economies

Abstract

The two purposes of the research are (a) to develop an analytical model that views the economy/polity as a social system with interactive subsystems of actors: households, firms, government, political parties and other significant actors, and (b) apply the analytical model to construct and verify a timeline that figures major events in world development that shaped the evolution of the western economies, and the relative strength of their interacting subsystems. The timeline highlights the changing and evolving dominance of the major subsystems in the economic history of the western world. We differ from the convention of looking at history as the occurrence of exogenous consequential events and offer instead a system dynamics analysis that makes historical events endogenous and to be affected by the powerplay within the system. The current dominance of the firm subsystem in western countries is demonstrated to be the accumulated result of centuries of past events: wars, discoveries, colonies, trade, political enlightenments, and industrial revolutions that strengthened participation and interactions in the firm subsystem at the cost of weakened dominance of rival subsystems (those of traditional households, theocrats, manors, communes, royals, and the modern state subsystem). The behavioral orientation of a social system is explainable in terms of (a) interactive influence (which occurs during the participation and interaction of agents in multiple settings, with some settings having more interactive influence than others), and (b) regulative influence (where the conduct of the one subsystem overrules that of other subsystems). Western economic history suggests a positive conditional correlation and convergence between (a) and (b). Being conditional, the convergence between (a) and (b) may not hold in other world contexts, i.e., China, India, Arab and African countries.