A Systems Study and the Fallacy of Perseus

Considers a systems model of changes in industrial structure, employment and income levels. A country subsidizes imported resources to augment its existing resource base and to develop an export promotion strategy. This is leveraged with borrowed money. According to neo‐classical economic theory, factors of production are paid in proportion to their output contribution. Economic growth occurs when the return from a higher rate of factor utilization exceeds the cost of subsidization. In the study of ordinary differential equations, simultaneous changes in variables can be treated as part of a dynamic system subject to constraints. At any moment resources are fixed, and we may assume D'Alembert's principle of virtual work with respect to the internal constraints of the system. Subsidized economic growth shares a paradigm with analytical dynamics, the stability of motion around the neighbourhood of a singular point. The classical analytical‐topological methods which describe asymptotic stability are used to investigate economic policy.