The General Economic Theory: An Integrative Approach

Preface
Contents
1 The Time for a Grand Economic Theory
	1.1 The Synergetic Economics Generalizes the Foundations of Economic Analysis
	1.2 Speed and Time Scale in Synergetic Economics
		1.2.1 Adam Smith (1723–1790)
		1.2.2 Ricardo (1772–1823)
		1.2.3 Malthus (1766–1834)
		1.2.4 Marx (1818–1883)
		1.2.5 The Walrasian General Equilibrium Theory
	1.3 The Time to Integrate Economic Theories
	1.4 The Structure of the Book
	References
2 The Basic Model for the Integration
	2.1 The Basic Model
		2.1.1 The Production Sector
		2.1.2 The Household’s Current Income, Disposable Income, and Budget
		2.1.3 The Utility Function and Optimal Behavior
	2.2 The Basic Model with the Cobb–Douglas Functions
	2.3 The Theoretical Foundation of the Utility Function
	2.4 The Basic Model Generates the Keynesian Consumption Function
	2.5 The Basic Model Generates the Solow Growth Model with Taste Change
	2.6 The Basic Model Generates the Ramsey–Cass–Koopmans Model with Preference Change
	References
3 An Integration of Walrasian General Equilibrium, Ricardian Distribution, and Neoclassical Growth Theories
	3.1 Integrating the Walrasian General Equilibrium, Ricardian Distribution and Neoclassical Growth Theories
		3.1.1 The Production Functions and Marginal Conditions
		3.1.2 Household Behavior
		3.1.3 Demand and Supply of the Three Sectors and Full Employment of Factors
	3.2 Dynamic Behavior of the Economy
	3.3 Changes in the Preferences and Human Capital Affect the Dynamics
		3.3.1 Group 1 Augments the Propensity to Save
		3.3.2 Group 1 Improves the Human Capital
		3.3.3 Group 3 Increases Propensity to Consume Agricultural Good
		3.3.4 Group 3’s Population Is Increased
		3.3.5 Group 1’s Population Being Increased
	3.4 Business Cycles Due to Exogenous Shocks in the General Model
		3.4.1 Group 1’s Propensity to Save Periodically Oscillates
		3.4.2 Group 1’s Human Capital Periodically Oscillates
		3.4.3 Group 3’s Propensity to Consume Agricultural Good Periodically Oscillates
		3.4.4 Group 3’s Population Periodically Oscillates
	3.5 On Income Gaps and Real Business Cycle Theory
	Appendix: Dynamics with Multiple Capital and Consumer Goods
		The Capital Goods Sectors
		The Consumer Goods Sectors
		Disposable Income, Utility Function, and Optimal Behavior
		Portfolio Choice
		The Change in Physical Capital
		The Equilibrium Condition for Consumer Goods Sectors
		Full Employment of Input Factors
		The National Wealth Is Owned by the Population
		Find the Differential Equations to Determine the Movement of the Economy
	References
4 Education, National Debts, and Development Traps
	4.1 Growth with Education and Saving
		4.1.1 The Goods Sector
		4.1.2 The Household Behavior
		4.1.3 The Education Sector
	4.2 The Dynamics and Multiple Equilibrium Points
	4.3 Unstable Unlimited Growth Versus Poverty Traps
	4.4 Changes in Policy and Preferences in Stable and Unstable Economies
		4.4.1 The Education Policy
		4.4.2 The Impact of the Propensity to Save
	4.5 Growth by Integrating the Diamond Debt and Uzawa–Lucas Models with Education Subsidies
		4.5.1 The Labor Force and Factor Input Distribution
		4.5.2 The Production Sector
		4.5.3 The Education Sector
		4.5.4 Accumulation of Human Capital
		4.5.5 The Disposable Income and Optimal Behavior
		4.5.6 The Government Expenditure and Tax Income
		4.5.7 The Dynamics of Government Debt
		4.5.8 Demand and Supply in Education Market
	4.6 Short-Run and Long-Run Debts Due to Exogenous Changes
		4.6.1 A Rise in the Government Subsidy Rate on Education
		4.6.2 A Rise in the Total Factor Productivity of the Education Sector
		4.6.3 A Rise in the Total Factor Productivity of the Industrial Sector
		4.6.4 A Rise in the Propensity to Obtain Education
		4.6.5 A Rise in the Tax Rate on Consumption
		4.6.6 Stronger Increasing Returns to Scale in Learning from Education
	4.7 Some Comments on Poverty
	References
5 Inequalities with Racial Human Capital Externalities
	5.1 Racial Human Capital Externalities and National Growth
		5.1.1 The Two Sectors
		5.1.2 Consumer Behaviors and Wealth Dynamics
		5.1.3 Demand and Supply of the Two Sectors
		5.1.4 Human Capital with Racial Human Capital Externalities
	5.2 Changes in a Race’s Preference and Human Capital
		5.2.1 Race 1’s Human Capital Externality is Strengthened
		5.2.2 Race 1’s Population is Increased
		5.2.3 Race 1’s Propensity to Save is Increased
	5.3 On Inequality of Income and Wealth
	References
6 Growth with Public Knowledge and Private Human Capital
	6.1 Public Knowledge, Individual Human Capital, and Private Wealth
		6.1.1 The Total Labor Supply and Behavior of Production Sector
		6.1.2 The Education Sector
		6.1.3 Accumulation of Human Capital
		6.1.4 Knowledge Creation and Government’s Research Policy
		6.1.5 Balance of Demand and Supply and Full Employment of Factors
	6.2 Growth with Knowledge, Human Capital, and Wealth
	6.3 The Role of Creativity, Government Policy, and Preference
		6.3.1 A Rise in the Research Sector’s Creativity
		6.3.2 Group 3’s Population Increases
		6.3.3 Group 1 Applies Human Capital More Effectively
		6.3.4 A Rise in the Tax Rate on the Production Sector
		6.3.5 A Rise in the Tax Rate on Group 1’s Consumption of Goods
		6.3.6 A Rise in Group 1’s Propensity to Receive Education
		6.3.7 Group 1 More Effectively Accumulates Human Capital
	6.4 Some Comments on Innovation with Microeconomic Foundation
	References
7 Population Dynamics with Endogenous Birth and Mortality Rates
	7.1 Haavelmo’s Growth Model and Chaos with Population
	7.2 Global Population and Economic Growth with Free Trade
		7.2.1 The Production Sectors and Marginal Conditions
		7.2.2 Consumer Behaviors
		7.2.3 The Birth and Mortality Rates and Population Dynamics
		7.2.4 Wealth Dynamics
		7.2.5 Balance Conditions
	7.3 Global Population with Changes in National Characters
		7.3.1 Human Capital of Country 1’s Woman Being Improved
		7.3.2 Country 1’s Mother Spending More Time on Per Child Fostering
		7.3.3 A Rise in Country 1’s Total Factor Productivity
		7.3.4 A Rise in Country 1’s Propensity to Have Children
		7.3.5 Country 1’s Income having Stronger Impact on the Mortality Rate
		7.3.6 A Rise in Woman’s Propensity to Pursue Leisure Activities
		7.3.7 Impact of a Rise in Country 1’s Propensity to Save
	7.4 Population, Human Capital, and Physical Capital
		7.4.1 The Two Sectors and Marginal Conditions
		7.4.2 Human Capital Dynamics
		7.4.3 Consumer Behaviors
		7.4.4 The Birth and Mortality Rates and the Population Dynamics
		7.4.5 Wealth Dynamics
	7.5 The Population Affected by Preference and Other Conditions
		7.5.1 A Rise in the Mortality Rate Parameter
		7.5.2 A Rise in the Propensity to have Children
		7.5.3 A Rise in the Propensity to Receive Education
		7.5.4 The Human Capital Utilization Efficiency is Increased
		7.5.5 The Mortality Rate Elasticity of Human Capital is Enhanced
	References
8 Health, Environment, Resources, and Government
	8.1 Health, Environment, and Wealth
		8.1.1 National Labor Supply, Technologies, and Marginal Conditions
		8.1.2 Modeling of Health Caring
		8.1.3 Consumer Behaviors
		8.1.4 Dynamics of Household’s Health and Change in Environment
		8.1.5 Behavior of the Environment Sector
		8.1.6 Equilibrium Conditions for Outputs and Full Employment of Factors
	8.2 Taxes and Preferences Changes in Health Caring and Leisure
		8.2.1 The Household Increases the Propensity to Use Health Caring
		8.2.2 The Household’s Efficiency of Applying Health is Increased
		8.2.3 The Household’s Human Capital is Enhanced
		8.2.4 A Rise in the Environmental Tax on the Capital Good Sector
		8.2.5 A Rise in the Tax Rate on the Consumption of Health Service
		8.2.6 A Rise in the Household’s Propensity to Use Leisure Time
		8.2.7 Pollutants Speed Up Health Deterioration
	8.3 Renewable Resources, Values, and Economic Structure
		8.3.1 The Industrial Sector
		8.3.2 The Agricultural Sector
		8.3.3 Choice Between Physical Wealth and Land
		8.3.4 Change of Renewable Resources
		8.3.5 Consumer Behavior
		8.3.6 Wealth Accumulation
		8.3.7 Balances of Demand and Supply for Industrial Goods
		8.3.8 Balances of Demand and Supply for Agricultural Goods and Renewable Resources
		8.3.9 All the Land Owned by Households
		8.3.10 Full Employment of Capital
		8.3.11 The Value of Physical Wealth and Capital
		8.3.12 Full Employment of Labor Force
		8.3.13 The Land Market Clearing Condition
		8.3.14 Land Use for Renewable Resources
	8.4 Changes in the Population and the Preference
		8.4.1 A Rise in the Propensity to Consume Resources
		8.4.2 A Rise in the Propensity to Consume Housing
		8.4.3 The Propensity to Consume Industrial Goods Being Enhanced
		8.4.4 A Rise in the Propensity to Consume Agricultural Goods
		8.4.5 A Rise in the Propensity to Save
		8.4.6 The Population Being Augmented
		8.4.7 A Rise in the Output Elasticity of Capital of the Resource Sector
	8.5 Comments on Dynamic Environment and Health
	References
9 Preference Change, Social Status, Habits, and Fashion
	9.1 Social Status and Inequality in Wealth and Income
		9.1.1 The Production Sectors and Marginal Conditions
		9.1.2 Disposable Incomes and Utility Functions
		9.1.3 Social Status and Propensities to Save and to Consume
		9.1.4 Optimal Household Behavior and Wealth Accumulation
		9.1.5 Market Equilibrium Conditions and Full Employment
	9.2 Social Status as Spirit of Capitalism and Other Factor Are Changed
		9.2.1 Group 1’s Spirit of Capitalism Rises
		9.2.2 The Total Factor Productivity of the Capital Goods Sector Being Enhanced
		9.2.3 Group 1’s Social Status More Strongly Affecting Its Propensity to Save
		9.2.4 Group 3’s Population Being Increased
		9.2.5 The Depreciation Rate of Physical Capital Rises
		9.2.6 Group 3’s Human Capital Rises
		9.2.7 A rise in the Output Elasticity of Capital of the Capital Goods Sector
	9.3 Growth and Fashion with Snobs and Bandwagoners
		9.3.1 Technologies and Marginal Conditions
		9.3.2 Disposable Incomes and Budgets
		9.3.3 Utility Functions and Optimal Decision
		9.3.4 A Brief Review on Fashion Dynamics and Habit Formation
		9.3.5 Average Consumption of Fashion and Preference Change
		9.3.6 Demand and Supply of the Three Sectors and Full Employment of Capital
	9.4 Fashion and Growth with Different Exogenous Changes
		9.4.1 The Bandwagoner’s Propensity to Consume Fashion is More Strongly Affected by the Average Fashion Consumption
		9.4.2 The Snob’s Propensity to Consume Fashion Is More Negatively Affected by the Average Fashion Consumption
		9.4.3 The Bandwagoner’s Propensity to Consume Fashion is Increased
		9.4.4 The Bandwagoner’s Human Capital is Improved
		9.4.5 A Rise in the Bandwagoner’s Population
		9.4.6 A Rise in the Snob’s Propensity to Save
	9.5 Modeling Human Behavior by Integrating Psychology
	References
10 Portfolio Choice in General Dynamic Equilibrium
	10.1 Exchange Values of Gold, Land, Physical Capital, and Human Capital
		10.1.1 The Industrial Sector
		10.1.2 The Agricultural Sector
		10.1.3 The Education Sector and Marginal Conditions
		10.1.4 Choice Between Physical Wealth, Gold, and Land
		10.1.5 Disposable Income, Budget, and Decision
		10.1.6 Dynamics of Human Capital
		10.1.7 Equilibrium for Demand and Supply and Full Use of Resources
	10.2 The Dynamics of Exchange Values with Exogenous Conditions Changes
		10.2.1 The Propensity to Use Gold is Augmented
		10.2.2 A Rise in the Propensity to Receive Education
		10.2.3 The Propensity to Consume Housing is Increased
		10.2.4 A Rise in the Propensity to Save
		10.2.5 A Rise in the Total Factor Productivity of the Industrial Sector
		10.2.6 The Population is Increased
	10.3 A Few Remarks on Asset Prices
	References
11 Money and Unstable Economic Changes
	11.1 Growth with the Money-in-Utility (MIU) Approach
		11.1.1 The Real Sector
		11.1.2 The Money via the “Helicopter Drop”
		11.1.3 The Disposable Income and Optimal Decision
	11.2 Equilibrium and Comparative Steady State
		11.2.1 The Inflationary Policy
		11.2.2 The Effects of Change in the Propensity to Hold Money
		11.2.3 Effects of Change in the Propensity to Own Wealth
	11.3 A Small Open-Country Economy with the Cash-in-Advance Approach
	11.4 Dynamics and Equilibrium
	11.5 An Integration of the Taylor Rule and the Solow-Tobin Model
		11.5.1 The Sector Behavior and Marginal Conditions
		11.5.2 Household Behavior
		11.5.3 Monetary and Fiscal Policy
		11.5.4 The Government’s Budget Constraint
		11.5.5 Capital Change
	11.6 Comparative Dynamic Analysis
		11.6.1 The Targeted Inflation Rate Is Enhanced
		11.6.2 The Total Factor Productivity Is Enhanced
		11.6.3 The Propensity to Hold Money Is Enhanced
		11.6.4 An Increase in the Propensity to Save
		11.6.5 The Tax is Increased
	11.7 Comments on Further Extensions
	References
12 Growth Theory Enriched with Monopoly, Monopsony, and Game Theories
	12.1 Monopolies and Perfect Competition in Solow–Uzawa’s General Equilibrium Growth Model
		12.1.1 The Production of Final Product
		12.1.2 Consumer Behaviors and Wealth Dynamics
		12.1.3 Wealth Accumulation
		12.1.4 Equilibrium for Monopoly Product
		12.1.5 The Behavior of the Monopolies
		12.1.6 Demand and Supply and Full Employment
	12.2 Long-Term Growth with Changes in Monopoly Productivity and Preference
		12.2.1 A Monopoly’s Total Factor Productivity Is Enhanced
		12.2.2 The Share Parameter of a Monopoly Product Is Increased
		12.2.3 The Share Parameter of Final Goods Is Increased
		12.2.4 A Monopoly’s Output Elasticity of Labor Is Enhanced
	12.3 Growth with Monopsony Against Woman in Labor Market
		12.3.1 Utility, Disposable Income, Budget, and Optimal Behavior
		12.3.2 Wealth Accumulation
		12.3.3 Production Sector
		12.3.4 Demand and Supply Balance
		12.3.5 Equilibrium and Comparative Statics Analysis
	12.4 Long-Term Equilibrium with Woman’s Characters
		12.4.1 Woman’s Human Capital Is Enhanced
		12.4.2 Woman’s Propensity to Use Leisure Time Is Increased
	12.5 Monopsony Against Woman Harms National Economic Performances
	12.6 Cournot-Nash Family Decision in an Extended Solowian Model
		12.6.1 The Disposable Income and Optimal Behavior
		12.6.2 Utility Functions and Budgets
		12.6.3 The Production Sector
		12.6.4 Equilibrium Conditions
	12.7 Dynamics of Cournot-Nash Family Decision with Exogenous Changes
		12.7.1 The Husband Derives Less Well-Being from His Wife’s Well-Being
		12.7.2 The Wife’s Human Capital Is Enhanced
		12.7.3 The Wife Increases Her Propensity to Save
		12.7.4 The Wife Increases Her Propensity to Consume Consumption Goods
		12.7.5 The Wife Increases Her Propensity to Consume Family Goods
		12.7.6 The Total Factor Productivity Is Enhanced
	12.8 On Contract Theory, Agent-Based Economics, and the General Theory
	References
13 Growth with Perfect and Monopolistic Competition
	13.1 The Dixit–Stiglitz Monopolistic Competition
	13.2 Integrating the Basic Model and Dixit–Stiglitz Model
		13.2.1 The Final Good Sector
		13.2.2 The Middle Good Sector
		13.2.3 Consumer Behaviors and Wealth Dynamics
		13.2.4 Demand and Supply of Final Goods and Full Employment
	13.3 Comparative Dynamic Analysis in the Solow–Dixit–Stiglitz Model
		13.3.1 A Rise in the Degree of Specialization
		13.3.2 A Rise in Output Elasticity of Intermediate Inputs
		13.3.3 The Unit Labor Requirement for the Production of Intermediates Rises
		13.3.4 The Propensity to Use Leisure Time Rises
		13.3.5 The Propensity to Save Rises
		13.3.6 A Rise in Human Capital
	13.4 An Integration of Neoclassical Growth, Dixit–Stiglitz Monopolistic Competition, and Walrasian General Equilibrium Theories
		13.4.1 The Total Labor Force
		13.4.2 The Final Good Sector
		13.4.3 Disposable Income and Budgets
		13.4.4 Utility Functions and Optimal Behavior
		13.4.5 The Middle Good Sector
		13.4.6 Balances in Final Good Market, Labor Market, and National Wealth
	13.5 Comparative Dynamic Analysis in Preferences and Market Characters
		13.5.1 The Elasticity of Substitution Between Two Varieties Rises
		13.5.2 Fixed Labor Cost of the Middle Goods Firm Is Increased
		13.5.3 A Rise in Variety of Middle Goods
		13.5.4 Group 1’s Propensity to Consume Middle Goods is Enhanced
		13.5.5 Group 1’s Propensity to Save Is Enhanced
		13.5.6 Group 3 Enhances Human Capital
		13.5.7 Group 3’s Population Is Increased
		13.5.8 The Profit Distribution Is Shifted
	13.6 On Growth with Contracts, Games, and Market Powers
	References
14 Trade Pattern, Tourism, and Global Development
	14.1 Integrating Heckscher–Ohlin and Oniki–Uzawa Trade Models
		14.1.1 Production Functions and Marginal Conditions
		14.1.2 Household Behavior
		14.1.3 Factor Markets and Demand and Supply
	14.2 Global Growth and Capital Flows with Various Exogenous Changes
		14.2.1 A Rise in the Total Factor Productivity of Country 1’s Industrial Sector
		14.2.2 A fall in the Output Elasticity of Country 1’s Industrial Sector
		14.2.3 Country 1’s Population is Increased
		14.2.4 Country 1 Increases Its Propensity to Consume the Domestic Commodity
		14.2.5 Country 1 Increases Its Propensity to Consume Country 2’s Global Commodity
		14.2.6 Country 1 Increases Its Propensity to Consume Services
		14.2.7 Country 1 Augments Its Propensity to Save
	14.3 Habit Formation and Preference Change with Free Trade
		14.3.1 The Production Sector and Marginal Conditions
		14.3.2 Households Behavior
		14.3.3 The Time Preference and Habit Formation
	14.4 Global Growth and Trade Pattern with Exogenous Changes
		14.4.1 Country 1’s Household Giving Lower Weights to More Distant Values of Consumption
		14.4.2 Country 1’s Wealth Effect on the Propensity to Save Becoming Stronger
		14.4.3 Country 1’s Propensity to Consume Being More Strongly Affected by Habits
	14.5 Trade in Goods and Tourism with Infrastructure and Externalities
		14.5.1 Industrial Sector
		14.5.2 Service Sector
		14.5.3 Full Employment of Capital and Labor
		14.5.4 Behavior of Domestic Households
		14.5.5 Demand Function of Foreign Tourists
		14.5.6 Full use of Land
		14.5.7 Demand and Supply for Services
		14.5.8 Behavior of the Government
	14.6 Impact of Various Shocks on the Tourist Economy
		14.6.1 A Rise in the Rate of Interest in the Global Market
		14.6.2 A Rise in the Total Productivity of the Service Sector
		14.6.3 Raising Tax Rate on the Service Sector
		14.6.4 Raising Tax Rate on Consumption of Services
		14.6.5 An Improvement in Human Capital
		14.6.6 A Rise in the Household’s Propensity to Consume Services
		14.6.7 Public Services More Strongly Affecting the Productivity of the Industrial Sector
	14.7 On Nominal Exchange Rates and Capital Flows
	References
15 Alonso Urban and Solow Growth Models Integrated
	15.1 Land Value, Residential Structure, and Growth
		15.1.1 The Total Labor Input and Production Sector
		15.1.2 The Relation Between the Lot Size and Residential Density
		15.1.3 Choice Between Physical Wealth and Land
		15.1.4 Travel Time and Cost to the CBD
		15.1.5 Land Ownership, Disposable Income, and Budget
		15.1.6 Utility, Amenity, and Optimal Solution
		15.1.7 Equal Utility Level, Wealth Accumulation and Market Equilibria
	15.2 Spatial Growth with Land Value Change
	15.3 Growth and Land Value with Exogenous Changes
		15.3.1 An Increase in the Interest Rate
		15.3.2 The Total Factor Productivity Being Enhanced
		15.3.3 The Propensity to Save Being Increased
	15.4 A Few Comments on Generalizing the Spatial Model
	References
16 Miscellaneous Issues and Conclusion
	References