Introduction to Modeling Economic Processes

Abstract

We now begin to see the importance of blending analytical and numerical solutions. Analytical methods can carry us to a level of understanding of system processes where further work would be either inefficient or impossible. For example, for many of the nonlinear dynamic relationships that underlie our models there are no analytical solutions at all. Numerical techniques, such as those provided by STELLA II, can take over from there. Conversely, numerical solutions can be sped up significantly and increased in accuracy if we make use of analytical methods. Analytics can give us equations that describe not just optimal operating points but whole optimal trajectories through time—a problem too difficult for numerics to formulate and too difficult for analytics to completely solve. Therefore, we attempt to merge both methods to build on the strength of each and arrive at a solution superior to each individual method.