Transfer function representation of the aggregate behavior of a class of economic processes

The purpose of this paper is to describe certain techniques which have proved useful in the systems analysis of large scale economic systems. A brief historical description of efforts to apply feedback control theory to management and economic systems is presented, which indicates the need for aggregation as a means of reducing the number of system variables to be considered. A transfer function is derived which, for two cases of practical interest, yields a simplified aggregate representation of the behavior of system microunits. Accuracy of the aggregate transfer function representation is discussed as a function of and of the bandwidth of input signals. Applications of the method are demonstrated with respect to problems arising in a systems analysis of the U. S. plywood industry.