THE 1986 INTERNATIONAL CONFERENCE OF THE SYSTEM DINAMICS SOCIETY. SEVILLA, OCTOBER, 1986 655
FEEDBACK AND DELAY IN PLANNED ECONOMY SYSTEM
CHONGJIE ZHAO, CHENGRUI XU
Dept. of Industrial Engineering
Zhejiang University,Hangzhou PRC
Summary: Slow feedback and passive control are the major problems
in pure planned economy country.In this peper we compare two kinds
of econozy cortrol forms which exist now:planned control and mar-
ket control,prove why our country take economy reform as the main
work. in the Seventh 5~Year Plan ane show what function these re-
forms will have.The method is based on system dynamics.Simuletion
tell us:the difference betwzen planned economy and market economy
consists in their feedsack control form,if we can combine the ad~
vantare in merket control with our system,our economy system will
;be improved “reatly.
INTRODUCTION i
After completing "Sixth 5-Year Plan",chinese are ambitious to w
their seven 5-year planeAccording to "The Report about Seventh 5—-
Year Plan" of our country the main work in this period of time is
still economy structure reform.It incluses:enlarging the right of
enterprise, developing product market,reforming price system,str—
engthening indirect control,etc.As a matter of fact the effective—
ness oi these reforms has been assured ,but in theoryit is still
necessery to show the fault of old economy structure and prove the
necessity of reform.It is my main goal in this peper to conside
dynamicly the influence: of different economy control to economy con=
struction and show that these reforms ere how to react on economy
system
Ih dynamics the differente between planned economy and market econo-
my consists in their feedback control forms,The former emphasis ma-
crocontrol of country plan ard the latter emphasis microcontrol.In
fact pure planned economy or pure market economy can not control the
system running very well.Therefore , based on the macrocontrol,plan-
ned economy countries are strengthening their microcontrol, i.e, in-
troducing a series of e.onomy reforms. At the same time market eco-
nomy system also use partly the country control or company monopoly
control. All of these,according to dynamic theory,have the same obs=
jective:controling every inflow variable and outflow variable to
make the system work most effectively.
656 THE 1986 INTERNATIONAL CONFERENCE OF THE SYSTEM DINAMICS SOCIETY. SEVILLA, OCTOBER, 1986
The Simplest Enterprise system
In the pure planned economy country its feedback form is similar to
that in enterprise. It means,all decision must be made by top leader.
All informat.ion can not influence the decision unless it has been
feedbacked to top leader.Therefore by means of enterprise feedback
system we can get similar information about planned economy system.
The simplest enterprise system flow diagram is:
production Shipment
rate Inventory vate
>.
Osa may X—==0
7 ¢ ~
ca PR\ ‘ SR s
c \
~ \ Discrepance of Inventory
/ \ / DI \
~.—@ Desired Inventory \
/ A
| \ \ Desire Changed Inventory
| \ zat
\ |
\
ian
~_--™ Inventory
4 Adjustment Time /
ano
\ Production SsH- Desiré changed Capac it:
\ 1 ie y
* cIaT
>
Capacity Input
Adjustment Time
cor cR \ fcrrR
Gross Delaied\ {Capacity
Capacityo@Pacity Capacity \\Input Rate
Quit Rate
ee) Discrepance of
Delaied Capacity
e
Desired Delay Capacity
Fig. 1 Enperprise system flow diagram
let C CIAT=2
@ DT TCDT=10
Its Simulation result is showed in Fig.2
For this model we may find from the simulation result that inven-
tory can reach equibibnhum after some time, but this time is somew
what long because the Delaied Capacity level is introduced and there
are no eny indirect feedback control.
THE 1200 INTERIVATIVNAL CUNTERERNGE VP TE OTS TEM MEINARIVG OUUIENT. OGVILL, VU IVPEN, sou 6Ur
The Difference Between Planned Sconomy System and Enterprise System
Because the simili-arity between planned economy system and enterprise
system,many decisioners used the control form of enterprise system to
planned economy system simply and didn't consider the difference bet-
ween them.Now we analyse their main difference:
1.The number of product in a planned economy country is much more than
that in enterprise and among these products most of them belong to wid
middle product.We must therefore divide them with en@ product when we
need to determine all product demand.In order to complete it,we need
to use the input-output method.But planned economysgystemis so large
that there are no possibility to record data,order information,and
compute releted matrix.
2.Large system has more levels than small enterprise system,its feed-
back ‘has bad sensitivity and it can not controlsthe system effectively.
3.eLarge system can allow larger discrepance, but it is easy to produce
large oscilation due to its bad sensitivity.
In this section we use enterprise system expressing these factors'
influence after making some change.We add a SMOOTH function before
the inflow rate variable CIR(Capacity Input Rate) and increase the
delay time DCDT to 4.The simulation result is showed in Fig. 3.
This result tell us that only btecause aSMOOTH function is introduced
and the delay time is changed from 2 to 4,inventory will never reach
equibilium and system character become much worse than tefore.In act-
ural our planned system has more this"smooth"and the delay time is
longer.
Improved planned economy system
Above difference 2,3 are based on simple product feedback control,
but difference 1 show the complex in large system.Because there are
middle products,we must use input-output matrix to consider the re~
lation tetween middle and end product.Its felation equation is:
Q=(I-A)~"Y (here Q is gross product and Y is sed.c product,I is
unit matrix)But it is impossible to obtain matrix A(related matrix)
due to above differencel,so that matrix Q is also impossible,There-
fore our-long rangeplanning is very unthinkable.the larger the sys-
tem is,the lower its precision.
Facing these facts,we have no any other way except strengthening its
inner control.0ld strategy “Take Steel. as the key link","Take Grain
as the Key Link" have proved to te uneffective.fhe reason is thet
we did notbase our economic strategy on economic law,did not deter~
mine the gross product's capacity investment according to end product
demandytherefore aim discrepance is unaviodable.
658 THE 1986 INTERNATIONAL CONFERENCE OF THE SYSTEM DINAMICS SOCIETY. SEVILLA, OCTOBER, 1986
“hen macroplan can not meet the actural need ,we must improve our
system's feedback sensitivity in order to improvei its control abi-
lity,strengthen indirect control of subsystem and add middle decision.
so that this economic’system correspond with actural need gradually.
In the INTRODUCTICN. section we have tol’ you that our main work in
the Seventh 5-Year Plan is economic reform:enlagging the right of en-
terprise, developing oroduct murket,reforming price systemand streng-
thening indire ct control.In fact all of these reforms are according
to economic law and system principle.Now we introduce. these reforms
to above enterprise system in order to get some informatdon,simulation
result is showed in Fig. 4.
Based on these reforms,some changes must made in our program.we use
TABLE function to express PPR (Production Productivity) and to ex-
pressdemand elasticity,i.e 5R(Shipment Rate) in this model.
These changes are: .
PR, YSTASLE(TAPR, FDIINV.K,.7,1.4,61)
TAPR=.875/.89/.92/4/1.1/1418/1422/1,25
FDLINY. Ke DI/TEV.K
SR KL=GS2*EFFSRR
EFF Si K=TAELE(TS2,FDIINV.K,0,1,.2?
1.41 .7/.83/.91/1-
Bey Pap
CONCLUSION
After introducin: soe reforms for the planned econosy system,we cet
good system chBracter.It is Lecause the system feedback sensitivity
and indirect control ability have been improved.But it do not mean
we have solve¢ ell protlems.In our model demand(i.e SR Shipment Rate)
is considered as a constant,thcrefore inventory can reach evuilibrium
e.sily.+f we consider demand as a variable,chaned according to act-
ural need,this system will become more complex and more problems will
need to te solved,
In this paper we do not discuss the problem further.1lt has been ine)»
cluded in my another paper "Input-Cutput Bynamic System Analysis of
planned Economy Sountry".The main subject in that paper is about the
Gecision of investment policy.
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