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+\chapter{Introduction}
+\label{Introduction}
+
+\section{New to system dynamics?}
+\label{intro:new}
+
+Minsky is one of a family of ``system dynamics'' computer
+programs. These programs allow a dynamic model to be constructed, not
+by writing mathematical equations or numerous lines of computer code,
+but by laying out a model of a system in a block diagram, which can then
+simulate the system. These programs are now the main tool used by
+engineers to design complex products, ranging from small electrical
+components right up to passenger jets.
+
+
+Minsky adds another means to create the dynamic equations that are
+needed to define monetary flows---the ``Godley Table''---which is
+discussed in the next section for users who are experienced in
+system dynamics. In this section, we'll give you a quick overview of
+the generic system dynamics approach to building a model.
+
+
+Though they differ in appearance, they all work the same way:
+variables in a set of equations are linked by wires to mathematical
+operators. What would otherwise be a long list of equations is
+converted into a block diagram, and the block diagram makes the causal chain
+in the equations explicit and visually obvious.
+
+For example, say you wanted to define the rate of employment as
+depending on output (GDP), labor productivity and population. Then you
+could define a set of equations in a suitable program (like Mathcad):
+
+\begin{eqnarray*}
+\mathrm{GDP}&:=&100\\
+\mathrm{LaborProductivity}&:=&1\\
+\mathrm{Population}&:=&100\\
+\mathrm{Workers}&:=&\mathrm{GDP}\div\mathrm{LaborProductivity}\\
+\mathrm{EmpRate}&:=&\mathrm{Workers}\div\mathrm{Population}\\
+\mathrm{EmpRate}&=&1
+\end{eqnarray*}
+
+Or you could define it using a block diagram, such as Minsky:
+
+\begin{center}
+%\fwhtmladdimg{NewItem1.png}
+\resizebox{\textwidth}{!}{\includegraphics{images/NewItem1.eps}}
+\end{center}
+
+For a simple algebraic equation like this, modern computer algebra
+programs like Mathcad are just as good as a block diagram programs like
+Vissim or Minsky. But the visual metaphor excels when you want to describe a
+complex causal chain.
+
+
+These causal chains always involve a relationship between stocks and
+flows. Economists normally model stocks and flows by adding an
+increment to a stock. For example, the level of capital $K$ is defined as
+a difference equation, where capital in year $t$ is shown as being 
+capital in year $t-1$ plus the investment that took place that year:
+
+\begin{displaymath}
+K_t=K_{t-1}+I_{t-1}
+\end{displaymath}
+
+The problem with this approach is that in reality, capital is
+accumulating on a daily, or even hourly, basis. It is better to model
+stock as continuous quantities and for this reason, all stocks and
+flows in Minsky are handled instead as integral equations. The amount
+of capital at time $t$ is shown as the integral of net investment
+between time 0 and today:
+
+\begin{displaymath}
+K(t)=\int_0^t I(s)ds
+\end{displaymath}
+
+However, rather than being shown as an equation, the relationship is shown as a diagram:
+
+\begin{center}
+\includegraphics{images/NewItem7.eps}
+\end{center}
+
+The advantages of the block diagram representation of dynamic equations
+over a list of equations are:
+\begin{itemize}
+\item    They make the causal relationships in a complex model
+  obvious. It takes a specialized mind to be able to see the causal
+  relations in a large set of mathematical equations; the same
+  equations laid out as diagrams can be read by anyone who can read
+  a stock and flow diagram---and that's most of us;
+\item The block diagram paradigm makes it possible to store components of
+  a complex block diagram in a group. For example, the fuel delivery
+  system in a car can be treated as one group, the engine as another,
+  the exhaust as yet another. This reduces visual complexity and also
+  makes it possible for different components of a complex model to be
+  designed by different groups and then ``wired together'' at a later
+  stage.
+\end{itemize}
+
+For example, here's a model of a 4 cylinder engine car---one of the
+simple examples distributed with the program Vissim:
+
+\begin{center}
+\fwhtmladdimg{NewItem8.png}
+\end{center}
+
+Programs like Vissim and Simulink have been in existence for almost 2
+decades, and they are now mature products that provide everything
+their user-base of engineers want for modeling and analyzing complex
+dynamic systems. \htmlref{So why has Minsky been
+  developed?}{intro:experienced}
+
+\section{Experienced in system dynamics?}
+\label{intro:experienced}
+
+As an experienced system dynamics user (or if you've just read \htmlref{``New to
+system dynamics?''}{intro:new}), what you need to know is what Minsky
+provides that other system dynamics programs don't. That boils down to
+one feature: The Godley Table. It enables a dynamic model of
+financial flows to be derived from a table that is very similar to the
+accountant's double-entry bookkeeping table.
+
+
+The dynamics in financial flows could be modeled using the block diagram
+paradigm. But it would also be very, very easy to make a mistake
+modeling financial flows in such a system, for one simple reason:
+every financial flow needs to be entered at least twice in a
+system---once as a source, and once as a sink.
+
+
+For example, if you go shopping and buy a new computer with your
+credit card, you increase your debt to a bank and simultaneously
+increase the deposit account of the retailer from whom you buy the
+computer. The two system states in this model---your credit card
+(``BuyerCredit'') and the retailer's deposit account
+(``SellerDeposit'')---therefore have to have the same entry (let's call
+this ``Card'') made into them. Such a transaction would look
+like this:
+
+
+\begin{center}
+\includegraphics{images/NewItem11.eps}
+\end{center}
+
+That would work, but there's nothing in the program that warns you if
+you make a mistake like, for example, wiring up the BuyerCredit entry,
+but forgetting the SellerDeposit one:
+
+\begin{center}
+\includegraphics{images/NewItem12.eps}
+\end{center}
+
+Or, perhaps, wiring up both blocks, but giving one the wrong sign:
+
+\begin{center}
+\includegraphics{images/NewItem51.eps}
+\end{center}
+
+In a very complex model, you might make a mistake like one of the above, run the simulation and get nonsense results, and yet be unable to locate your mistake.
+
+
+Minsky avoids this problem by using the paradigm that accountants
+developed half a millennium ago to keep financial accounts accurately:
+double-entry bookkeeping. Here is the same model in Minsky:
+
+\begin{center}
+\begin{tabular}{|c|cc|c|}
+\hline
+Flows $\downarrow$ / Stock Variables
+$\rightarrow$&\multicolumn{1}{|c|}{$BuyerCredit$}&\multicolumn{1}{|c|}{$SellerDeposit$}&Row Sum\\\cline{2-3}&\multicolumn{1}{|c|}{asset}&\multicolumn{1}{|c|}{liability}&\\\hline
+Initial Conditions&$0$&$0$&0\\
+Buyer Accesses Credit&$Card$&$Card$&0\\
+\hline
+\end{tabular}
+\end{center}
+
+This is an inherently better way to generate a dynamic model of financial flows, for at least two reasons:
+\begin{itemize}
+\item All financial transactions are flows between entities. The
+  tabular layout captures this in a very natural way: each row shows
+  where a flow originates, and where it ends up
+\item The program adopts the accounting practice of double-entry
+  bookkeeping, in which entries on each row balance to zero according
+  to the {\em accounting equation} (Assets=Liabilities+Equities). The source is
+  shown as a positive value increasing the value of assets, the sink
+  is a positive value increasing a corresponding liability. If you
+  don't ensure that each flow starts somewhere and ends
+  somewhere---say you make the same mistake as in the block diagram
+  examples above, then the program will identify your mistake.
+\end{itemize}
+
+If you forget to enter the recipient in this transaction, then the Row
+Sum identifies your mistake by showing that the row sums to ``Card''
+rather than zero:
+
+\begin{center}
+\begin{tabular}{|c|cc|c|}
+\hline
+Flows $\downarrow$ / Stock Variables
+$\rightarrow$&\multicolumn{1}{|c|}{$BuyerCredit$}&\multicolumn{1}{|c|}{$SellerDeposit$}&Row Sum\\\cline{2-3}&\multicolumn{1}{|c|}{asset}&\multicolumn{1}{|c|}{liability}&\\\hline
+Initial Conditions&$0$&$0$&0\\
+Buyer Accesses Credit&$Card$&&$Card$\\
+\hline
+\end{tabular}
+\end{center}
+
+And it also identifies if you give the wrong sign to one entry:
+
+\begin{center}
+\begin{tabular}{|c|cc|c|}
+\hline
+Flows $\downarrow$ / Stock Variables
+$\rightarrow$&\multicolumn{1}{|c|}{$BuyerCredit$}&\multicolumn{1}{|c|}{$SellerDeposit$}&Row Sum\\\cline{2-3}&\multicolumn{1}{|c|}{asset}&\multicolumn{1}{|c|}{liability}&\\\hline
+Initial Conditions&$0$&$0$&0\\
+Buyer Accesses Credit&$Card$&$-Card$&$2Card$\\
+\hline
+\end{tabular}
+\end{center}
+
+Minsky thus adds an element to the system dynamics toolkit which is
+fundamental for modeling the monetary flows that are an intrinsic
+aspect of a market economy. Future releases will dramatically extend
+this capability. 
+