Conservation of city heritage and life by integrating

biomimicry and biophilic architectural design of

community center Cycles
By
Eyob yohannes

Adama Science and Technology University

3
Contents

Acknowledgments iv

1 Introduction 1
1.1 Background of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Statement of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Objectives of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3.1 General Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3.2 Specific Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Significance of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2 Literature Review 5

3 Methodologies 8
3.1 Source of Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Procedure of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4 Schedule and Budget Breakdown 9

4.1 Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Budget Breakdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Bibliography 12

4
Acknowledgments

First and foremost, I would like to praise and thank God, the almighty, who has granted
countless blessing, knowledge, and opportunity to complete this proposal.
Secondly, many thanks to my advisor Dr. Tamirat Temesgen for his valuable comments and
suggestions throughout my work.
Finally, my deepest gratitude goes to my family for their unflagging love, prayers, caring,
sacrifices and unconditional support throughout my life and my study.

5
Chapter 1

Introduction

1.1 Background of the Study

Economic growth continues to be one of the most relevant and exciting sub-areas of economics.
Its relevance stems from the questions it focuses on. The problem of economic development
remains a major one for humanity at large and for economics as a science. At the time Adam
Smith laid many of the foundations of modern economics, there were likely small differences
between the richest and the poorest nations in the world [1, 2] . Since then, the gaps between
the rich and poor have increased to a level that would have been incomprehensible to most
18th and 19th century economists.

Mathematical economics is a theoretical and applied science, whose purpose is a Mathemati-

cally formalized description of economic objects, processes, and phenomena [3, 4]. Most of the
economic theories are presented in terms of economic models. In mathematical economics ,
the properties of these models are studied based on formalizations of economic concepts and
notions. In mathematical economics, theorems on the existence of extreme values of certain
parameters are proved, properties of equilibrium states and equilibrium growth trajectories are
studied, etc [3–5] . This creates the impression that the proof of the existence of a solution
(optimal or equilibrium) and its calculation is the main aim of mathematical economics [3, 6] .

The introduction of mathematical methods into economics has been a long process. Pieces
of essentially mathematical reasoning applied to economic problems have been detected as far
back in history as in Aristotle’s work and in the 18th and early 19th centuries, outstanding
mathematicians such as Bernoulli, Gauss, Laplace and Poisson developed truly mathematical
models to discuss economic problems [4, 7] .

In reality, the most important purpose is to formulate economic notions and concepts in math-
ematical form, which will be mathematically adequate and self-consistent, and then, on their
basis to construct mathematical models of economic processes and phenomena. Moreover, it is
not enough to prove the existence of a solution and find it in an analytic or numerical form, but
it is necessary to give an economic interpretation of these obtained mathematical results [3,4] .

Nonlinear economic dynamics may be considered just a collection of models with essentially
nonlinear ingredients that require the use of a particular set of (relatively new) mathematical
tools and has recentlty become more prominent in main stream economics [8, 9] .

1
2 CHAPTER 1. INTRODUCTION

A mathematical model of the economy is a formal description of certain relationships be-

tween quantities, such as prices, production, employment, saving, investment, etc., with the
purpose to analyze their logical implications. Some of those relationships derive from empirical
observation; others are deduced from theoretical axioms concerning the assumed behavior of a
“rational” economic agent, the so-called homooeconomicus [4] .

Specifically, nonlinear models played an important role in modelling economic dynamics dur-
ing the first part of this century [10–12] . By the 1960s , however, the profession had largely
switched to the linear approach making use of observation that stable low order linear stochastic
difference equations could generate cyclic processes that mimicked actual business cycles [13] .

The hypothesis of trade cycles has been one of the important fields of macroeconomics since the
establishments of macroeconomics were laid by Keynes’s Common General Theory. In the pe-
riod between the late 1930s and the early 1950s, classic models based on Keynes were proposed
to explain the mechanism of business cycles [10, 12, 14–17] . These models of business cycles
are even today useful for understanding a lot of aspects of business cycles as observed in reality .

Hiroki Murakami, obtained different economic equilibria and discuss different stability con-
ditions for the two sector Keynesian model of business cycles [18] . Therefore, the purpose of
this thesis will be to modify a two-sector Keynesian model of business cycles of Hiroki Murakami
into a three- sector Keynesian model of business cycles and investigating different equilibria
conditions and stability conditions taking the work of Hiroki Murakami as a steeping stone .

1.2 Statement of the Problem

Hiroki Murakami in [18] set up a two-sector model as follows:

y˙ c = αc [C(yc , yi ) − yc ] ,
y˙ i = αi [Ic (yc , kc ) + Ii (yi , ki ) −
yi ] , (1.1)
k˙ c = Ic (yc , kc ) − δkc
 ,
˙
k i = Ii (yi , ik ) − iδk ,

where

❼ αc , αi and δ are positive constants ;

❼ yc and yi stand for the level of income or output of the consumption good and investment-
good sectors, respectively;

❼ kc and ki stand for the existing stocks of the investment good (capital) of the consumption-
good and investment-good sectors, respectively;

❼ C is the consumption function;

❼ Ic and Ii are the (gross) investment functions for the consumption-good and investment-
good sectors, respectively; δ stands for the rate of capital depreciation;

❼ αc and αi are the parameters that measure the speed of quantity adjustment processes
for the consumption-good and investment-good sectors, respectively.
1.2. STATEMENT OF THE PROBLEM 3

The first two equations in (1.1) describe the quantity (or income) adjustment processes in the
consumption-good and investment-good sectors, respectively. These equations mean that a
change in the output (or of income) of each good is proportional to the existing excess demand
or supply and imply that the level of output is adjusted to meet the demand for each good. In
this respect, they are consistent with Keynes’ [18] principle of effective demand. Based on the
Keynesian theory, we assume that aggregate consumption is a function of both sectors’ income
and that each sector’s investment is a function of its output (or income) and stock of capital. In
particular, the investment functions are consistent with the profit principle of investment .Note
that the rates of profit on (or the real rental prices for) capital are not necessarily equal between
sectors and that stocks of capital for sectors are not related to each other by the postulate of
perfect competition.

The last two euations in (1.1) represent the capital formation processes for the consumption-
good and investment-good sectors, respectively. Note that the rate of depreciation is assumed
to be the same for both sectors, but this assumption can be relaxed without so much difficulty.

In his work, he discussed on

❼ the existence and uniqueness of equilibrium ,

❼ the investigation of stability and instability conditions , and
❼ the existence of a periodic orbit

Therefore, our aim is extending the work of Hiroki Murakami in [18] by modifying its two-sector
Keynesian model of business cycles to a three- sector Keynesian model of business cycle .
In general, the purpose of our thesis will be answering the following questions:
❼ How do we modify a two-sector Keynesian model of business cycle to a three- sector
Keynesian model of business cycle by taking (1.1) as a steeping stone?

❼ What are the conditions for the existence of equilibria of the modified three- sector Key-
nesian model of business cycle ?
❼ What are the different stability conditions for the economic growth dynamic system?
4 CHAPTER 1. INTRODUCTION

1.3 Objectives of the Study

1.3.1 General Objective
The general objective of this thesis will be to modify a two-sector Keynesian model of business
cycle of Hiroki Murakami to a three- sector Keynesian model of business cycles .

1.3.2 Specific Objectives

The specific objectives of this thesis are

- modifying a two-sector Keynesian model of business cycle of Hiroki Murakami to a three-

sector Keynesian model of business cycles.
- to assess the existence of economic equilibria of the modified three- sector Keynesian
model of business cycles .
- to set different stability conditions for a three- sector Keynesian model of business cycles
.

- to demonstrate the applications of the results using specific numerical examples.

1.4 Significance of the Study

The result of this thesis will have the following importance

- It will provide different stability conditions for a three- sector Keynesian model of business
cycles .
- It will deliver the impacts of sectoral interactions.

- It will serve for other analysts on the investigation of a three- sector Keynesian model of
business cycles .
Chapter 2

Literature Review

There are two main frameworks in modeling economic growth with capital accumulation in
continuous time. These are Solow’s one-sector growth model and Uzawa’s two-sector growth
model [19] . The Solow model is the starting point for almost all analyses of economic growth.
As consumer behavior is not described by utility optimization in the Solow model, it does not
have a rational mechanism to deal with issues related to optimal consumption over time. Ram-
sey’s 1928 paper on optimal savings has influenced modeling of consumers’ behavior since the
mid 1960s [20, 21] . This approach assumes that utility is addable over time. It has become
evident from extensive publications in the economic literature based on this approach over the
last fifty years that even a simple model tends to lead to a complicated dynamic system. For
instance, Barro and Sala-I-Martin in 1995 propose a one-sector growth model with endogenous
time within the Ramsey framework. As demonstrated by Barro and Sala-I-Martin, the model
even with simple utility and production becomes too complicated to get explicit conclusions.

Solow’s one-sector growth model and Uzawa’s two-sector growth model have played the role of
the key models in the neoclassical growth theory [22–24]. These two models and their various
extensions and generalizations are fundamental for the development of new economic growth
theories as well [21, 25]. Since Uzawa proposed the model in [22] , many works have been
published to extend and generalize the model in from the 1960s s till today [26–33] .

The Uzawa model extends the Solow model by a break down of the productive system into
two sectors using capital and labor, one of which produces capital goods, the other consump-
tion goods [23] .

The main goals of macroeconomic studies is to explain the mechanism of business cycles. Soon
after the basis of macroeconomics was established by Keynes’General Theory, a lot of theories
of business cycles were proposed from the late 1930s to the 1950s . For example, Kalecki (1935,
1937) and Kaldor (1940) put forward models of business cycles by synthesizing the Keynesian
multiplier theory and the profit principle of investment, while Harrod (1936) and Samuelson
(1939) initiated the so-called multiplier-accelerator model of business cycles by combining the
multiplier theory and the acceleration principle of investment [18, 34] .

These classic models of business cycles can be characterized by the following Keynesian features:

i. quantity or income adjustment governed by the principle of effective demand prevails

ii. variations in investment are the main source of business cycles.

5
6 CHAPTER 2. LITERATURE REVIEW

In their models, the mechanism of business cycles is explained as follows: investment is linked to
aggregate income and capital stock and aggregate income and capital stock are varied through
the multiplier process and capital formation induced by investment, respectively.

It is true that a lot of models of business cycles, including the aforementioned ones, can describe
some aspects of actual business cycles, but a certain important viewpoint is missing in them:
the role of sectoral interactions in business cycles. This aspect is lacking in one-sector or one-
commodity models of business cycles, but it should not be ignored in discussing actual business
cycles. It goes without saying that propagation’s of shocks from one industry to another do
enhance economic fluctuations in reality.

Hiroki Murakami in [18] put forward a two-sector model of business cycles by disaggregating
the economy into two sectors: the consumption good sector and the investment good
sector. He have examined the stability of equilibrium and the possibility of existence of a
periodic orbit in two-sector model. As a result, he revealed that the counterpart of the
Keynesian stability condition plays a key role in the stability of the two-sector model and that
a periodic orbit may arise by way of a Hopf bifurcation if the stability condition is not
satisfied . He also observed that the consumption good sector lags behind the investment
good sector along the periodic orbit and that interactions between these two sectors do play a
significant role in business cy- cles. Furthermore, he numerically investigated the
characteristics of a periodic orbit generated by a Hopf bifurcation in the two-sector model.
By performing numerical simulations, verified that a periodic orbit, representing persistent
business cycles, is actually generated by a Hopf bifurcationin in the two-sector model.

Both consumption and investment are components of aggregate expenditure. As Keynes

(1936)argued, however, they differ on the demand side in that the former responds passively
to aggregate income (through the‘consumption function’) while the latter has a decisive role in
determination of aggregate income (through the‘multiplier process’) and is the main cause of
economic fluctuations. As Harrod (1939) noticed, they also differ on the supply side in that the
former is not utilized as a factor of production while the latter is durable and functions as a fac-
tor of production (the duality of investment). These differences cannot properly be described in
one-sector models, but we believe that our two-sector model may shed a new light on them [18] .

Hiroki Murakami and Rudolf Zimka in [34] have examined mathematical details on the two-
sector Keynesian model proposed by Murakami [18] . i.e.

y˙ c = αc [C(yc , yi ) − yc ] ,
y˙ i = αi [Ic (yc , kc ) + Ii (yi , ki ) − yi ] ,
k˙ c = Ic (yc , kc ) − δkc
 ,
˙
k i = Ii (yi , ik ) − iδk ,
where
❼ αc , αi and δ are positive constants ;
❼ yc and yi stand for the level of income or output of the consumption good and investment-
good sectors, respectively;
❼ kc and ki stand for the existing stocks of the investment good (capital) of the consumption-
good and investment-good sectors, respectively;
 7

❼ C is the consumption function;

❼ Ic and Ii are the (gross) investment functions for the consumption-good and investment-
good sectors, respectively; δ stands for the rate of capital depreciation;

❼ αc and αi are the parameters that measure the speed of quantity adjustment processes
for the consumption-good and investment-good sectors, respectively.

In particular, their analysis has provided the criterion on the stability (or instability) of limit
cycles which are generated by Hopf bifurcations. The performed numerical simulations show
that they are consistent with the achieved theoretical results. Two-sector formalizations are
more appropriate descriptions of macroeconomic systems than conventional and traditional
one-sector ones, and they believe that their analysis contributes to deeper understanding of
real economies.
Chapter 3

Methodologies

3.1 Source of Information

To complete this study, some review articles and books will be used and necessary information’s
will also be gathered from internet, journals and related books.

3.2 Procedure of the Study

The thesis will be conducted based on the following procedures

❼ modifying a two-sector Keynesian model of business cycle of Hiroki Murakami to a three-

sector Keynesian model of business cycles .
❼ Determining the existence of the equilibria.
❼ Constructing different equilibria conditions for the economic model.
❼ Setting different stability conditions.
❼ Demonstrating the applications of the results using specific numerical examples.

8
Chapter 4

Schedule and Budget Breakdown

4.1 Schedule
The thesis will be conducted based on the following schedule

No. Activities to be achieved Oct. Nov. Dec. Jan. Feb. Mar. Apr. May
1 Reading on the given topic X X
2 Proposal development X X X X
3 Submitting the proposal X
4 Defending the Proposal X
5 Modifying the economic model X
6 Economic equilibrium conditions analysis X X X X X
7 Thesis Writing X X X X
8 Presenting the results obtained X

9
10 CHAPTER 4. SCHEDULE AND BUDGET BREAKDOWN

4.2 Budget Breakdown

Budget is vital for the successful accomplishment of a given study with in the specified period
of time. The following table describes budget allocation

No. Items Quantity Unit Cost Total Cost

in Birr
1 A4 Paper 5 Pack 300.00 1500.00
2 Printing and Duplicating papers 1500 2.00 3000.00
3 External Hard Disk (2TB) 1 4500.00 4500.00
4 Flash (32GB) 1 500.00 500.00
5 Re writable CD 5 80.00 400.00
6 Pen (Blue and Black) 20 blue 10.00 400.00
and 20
black
7 Compiling and Binding 5 200.00 1000.00
8 Mobile Card(for communication Purpose) 10 100.00 1000.00
9 Typing 300 pages 10.00 3000.00
10 Internet Service(Wifi) 9 months 600.00 5400.00
11 Notepads 3 250.00 750.00
12 Installing important softwares 2000.00
13 Document Holder 3 350.00 1050.00
14 Stapler 1 250.00 250.00
15 Highlighter pen 5 50.00 250.00
Grand Total 25,000.00
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