Dynamic State A

Dynamic State A

Dynamic State, a condition in which the relationships between economic phenomena are changing. The dynamic approach to economic problems was originally associated with the writers of English classical political economy: Adam Smith, Ricardo, Mill, etc. Their works attempt to analyse the growth and development of the nation's economy. This is typified in the Malthnsian theory of population, which was concerned with the different rates of growth of population and food supplies. The classical economists were concerned, too, with the approach of the stationary state. Their writings discuss the paths along which they believed the economy was moving towards it. During the twentieth century there has been considerable revival of interest in dynamics, but the approach is much narrower and less ambitious than the broad approach of the classicists.

Static analysis is the name usually given to the method of dealing with economic phenomena which attempts to determine the relationships between them at a given moment of time. All economic forces and the relations between them are the results of preceding relationships between economic phenomena. And these relationships are influenced by what may happen in the future.

Economic dynamics relates economic phenomena at different points of time. Methods of analysis which take into account past and expected values, time-lags and rates of change constitute economic dynamics. Dynamics is thus the study of economic phenomena in the context of preceding and succeeding events: the analysis of the process of change. Any economic problem may be analysed in this way. The problems of a stationary state may be analysed by a 'sequence analysis' which relates economic phenomena belonging to different points of time. An historically changing process may be treated in a static manner, each of its changing positions being studied and compared as successive points of equilibrium. It is the method of analysis which gives an economic problem its dynamic nature. There has been much development of economic dynamics in the study of business cycles and in price theory in the last thirty years.

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