Godley Tables

Godley Tables were primarily designed to enable the easy modelling of monetary dynamics. The examples in this chapter focus on the macroeconomics of money, but Godley Tables can be used to model the internal accounting of a corporation, its financial interactions with suppliers, etc. They can be used to model any process in which the entities being modelled are in one exclusive state or another —such as a pandemic in which people either have the disease or not, have recovered or not, died or not, etc., components passing through stages of a manufacturing process, and so on.

To insert a Godley Table into a model, click on the Godley Table Icon on the Widget bar. The icon will then attach to your mouse. Move to where you want to place it on the canvas and click the right mouse button again and the icon will be placed there.

To edit the Godley Table, either double click on the icon, or click on the right mouse button and choose “Open Godley Table” from the drop-down menu. When you do, you will see Figure 17:

Figure 17: Godley Table

The menu bar at the top controls exporting a Godley Table as CSV or LaTeX file for documentation purposes, editing (cut/copy/paste etc.), zooming in and out, useful options (whether to show the values of stocks and flows during a simulation, whether to use +/- or the accountants CR/DR, and whether to have a single or multiple Equity columns), and Help on using a Godley Table.

To use a Godley Table, you need to enter names for the Assets, Liabilities and Equity columns in it, enter initial conditions, and then record financial transactions on its rows. The default table has room for one Asset, Liability and Equity column.

Additional columns can be added by clicking on the relevant + button below the Asset, Liability and Equity headings; columns are deleted using the – button, and moved left or right using the  and  buttons.

Rows for financial transactions are added by clicking on the + button next to “Initial Conditions”. Figure 18 shows a simple financial model with a single Asset (Loans), a single Liability (Deposits), and the Banking sector’s Equity (the subscripted text is created by preceding the word with an underscore and enclosing the text in curly brackets {} (Banks{Equity}).

Figure 18: A Godley Table with Stocks created, initial conditions recorded, and a first row for a financial transaction added

Flows are entered as words rather than numbers: numerical values for flows are defined on the canvas itself. Two more operations are needed for a complete model, and these are shown in Figure 19 (the Title Banking Sector was added using the Title command from the Edit menu, and this image was exported as an SVG file from the Godleys Tab).

Figure 19: The simplest possible model of a monetary economy

To complete this model, the flows Credit , Interest and Spend have to be defined. The pre-requisite to doing this is to place these variables on the canvas. After the Godley Table in Figure 19 has been defined, the canvas will look like Figure 20.

Figure 20: The canvas after the Godley Table in Figure 19 has been defined

The stocks and flows in a Godley Table can be placed on the canvas in three ways:

• All at once, by clicking on the right mouse button while hovering over the Godley icon and choosing “Copy Stock Variables” and “Copy Flow Variables”. This will attach all Stocks and all Flows respectively to the mouse cursor; click anywhere on the canvas and they will be placed there;
• One at a time, by hovering over a flow (shown on the left-hand side of the icon) or stock (shown below the icon) and choosing “Copy”; and
• By clicking on the desired stock or flow in the browser window (see Figure 21) and then clicking anywhere on the canvas.

Figure 21: The canvas with the browser window beside it

Figure 22 shows the stocks and flows on the canvas, where you can give them definitions.

Figure 22: Stocks and Flows placed on the canvas

The most obvious is the definition of the flow Interest , which will be equal to the rate of interest on loans times Loans . Therefore, you need to define the rate of interest InterestRate . In a simple model, this will be a parameter : something set by the modeler rather than determined by interactions with other entities in the model as are Stocks and Flows.

Click where you’d like to place InterestRate on the canvas—above the stock Loans makes sense. Then type a multiply key (the * above 8 on the numeric keypad) and a multiply block will appear on the canvas. Wire Loans and InterestRate to the input ports of the multiply block, and wire the output to Interest , and you’ve defined the first equation in this model.

Figure 23: The model with the parameter InterestRate created and wired to calculate Interest

Defining the other elements of the model requires a little more thought. The easiest way to create a basic economic model here is to define another variable Money , as the sum of Deposits and BanksEquity ,[2] and then introduce a parameter for how rapidly it turns over (Velocity). Velocity is a parameter in this simplest of models, and Velocity times Money equals GDP . Then I define Credit as a percentage of GDP. Finally, Spend is related to the amount of money in the Banking Sector’s (shortterm) Equity ( BanksEquity ), using what engineers call a “time constant”—signified here by B B (which is entered as \tau_{Banks} in _Minsky_ ). This is a measure, expressed in years, of how long B τ banks could take to spend their equity down to zero if they maintained a constant rate of spending and there were no further inflows. The completed model, though without any plots to show its dynamics, is shown in Figure 24.

Figure 24: Completed final model, without plots

Footnotes

2 This is short-term equity rather than long-term. Minsky can enable multiple Equity columns to differentiate short-term from long-term equity.