Money, Cycles and Complexity

Please cite the paper as:
Prof. Dr. G. T. Ganchev, (2017), Money, Cycles and Complexity, World Economics Association (WEA) Conferences, No. 2 2017, Economic Philosophy: Complexities in Economics, 2nd October to 7th December 2017


The main idea of the present paper is that the appropriate inclusion of money and monetary circulation into economic analysis implies shift from acyclic to cyclic economic mathematical models. In the same tame such transition allows for the analysis of more complex economic instances, complexity being viewed in terms of computational complexity. Remarkably, the emergence and development of complex cyclical economic systems is actually possible only in the context of risk and uncertainty.

Recent comments


8 comment

  • Roy Langston says:

    The attempt to relate your analysis of non-neutral money to real economies does not appear to account for the divergent economic effects of different types of money, especially the divergent conditions of their issuance and withdrawal. In particular, it seems premature to declare commodity money like gold (which would a priori be expected to show negative feedback, thus damping cycles) a source of cyclical instability when the actual “gold standard” economies you refer to used much more of other forms of money (fiat money, debt money and deposit money that could a priori be expected to show positive feedback, thus creating cycles) than they did of gold. Any valid empirical analysis of such economies’ behavior through time would have to include a full disaggregation of their monetary issuance, stocks, and withdrawals into the four types of money. The difficulty of obtaining such data does not justify oversimplified analysis or claims of empirically observed relationships based thereon.

  • Ganchev says:

    My idea was that all types of money, irrespectively of their origin, must create cycles, for otherwise there will be accumulation of monetary assets in some agents and liabilities in others, so the monetary system will be disturbed. Next, since the cycles are complex objects, the problem reduces to how these complex objects may emerge and the somewhat paradoxical answer is that these complex objects can only exists if they are based on risky or uncertain connections.

  • Valerian Popkov says:

    We can to produce a synthesis of ideas concerning economic systems as a twofold entity – i.e. a unity of circular and communication processes. The duality of the economic system consists in the existence of two phenomenologically non-intersecting areas, corresponding to these processes and the two types of observers: internal and external. The area of internal states is characterised by circularity and closedness: although it participates in interactions with environmental factors that act as initiators of continuous structural changes that determine the dynamics of its states, the circularity and closedness of the economic system is always preserved. It is characterised by continuous parameters.The other area consists in interaction with the environment, which is carried out in a communicative way such that money with a binary code (payment – nonpayment) acts as a common communicative means. It is characterised by discontinuity, discreteness, yes or no, 0 or 1.
    How can such a twofold essence be investigated? Modern mathematics, for example, treats oppositions such as internal – external, continuous – discrete, resources – problems, goods – services and others as dual-conjugate structures. In many areas of modern science (mathematics, physics, logic), the method of identifying dual-conjugate structures is a fully recognised method of research, which has proved its fundamentality, effectiveness and promising potential. However, it would be premature to assert that duality as a method of theoretical analysis and synthesis has been fully understood and mastered by economists.

    • Ganchev says:

      I fully agree that duality and circularity are not well understood by economist and linear thinking prevails. Monetary circulation and the problems of circular (sustainable) economy are deeply connected.

  • Valerian Popkov says:

    Dear Prof.Ganchev!
    Thank you for your attention to my comment. I am very glad to know your opinion concerning monetary circulation..You can learn more about the approach that I develop in the article “Theory of economic constructivism”, which is available on Open Peer Discussion Forum for Economic Thought
    Will be grateful to know your opinion about this work in the comments. With best regards. Prof.Valerian Popkov

    • Ganchev says:

      Dear Prof. Popkov, I will read with great interest your article about economic constructivism and I will contact you. I am teaching in South-West University, Blagoevgrad, Bulgaria, e-mail

  • Ping Chen says:

    I guess that Ganchev mainly consider theortical model of money, not starting from empirical analysis. When I search economic chaos from monetary data in 1985, I was surprised that there were more than a dozen of monetary indexes, and Fed did not know which indicator is pertinent in conducting monetary policy. See P. Chen, “Empirical and Theoretical Evidence of Economic Chaos,” System Dynamics Review, Vol. 4, No. 1-2, 81-108 (1988). Also, Chapter 4, in P.Chen, Economic Complexity (2010). I do not know what is your choice of monetary index, M2, M3, or M4? Simple sum or DIVISIA indexes.
    More problem is the concept of monetary velocity that is not constant or stationary at all. The quantity theory of money is based on volume conservation in fluid dynamics with constant density. However, the existence of banking system create monetary flow like complex fluid with volume expansion or contraction in open flow. That is why US has huge deficit and increasing public debt without hard constrain, since the power nation will not go bankrupt until loss in total war like Germany during two world wars.
    Here, monetary theory in complexity economics have to deal with infinite open flow rather than circular flow.
    Hopefully, you can find new approach to answer the old question of non-neutrality of money and provide policy recommendation to countries with debt crisis including US, Japan, and Greece.
    Best wishes,

    Ping Chen, Fudan University
    Currently at Texas, US, wrote at 21:50, Nov. 30, 2017 (US Central Time)

    • Ganchev says:

      Dear Ping Chen,
      Your comment is extremely interesting. I think however that even USA have to obey cycles since their fiscal deficits are financed from outside, by foreign countries. You are right in the sense that monetary cycles in open economies have their particularities, including the special position of the most powerful reserve currencies.