Advances in Systems Science and Application (2015) Vol.15 No.4 392-399

The Market Laws Declaration of Economic
Development of the Countries Worldwide

S.Baizakov1, A. Oinarov2, J. Yi-Lin Forrest3 and N.Baizakov4

1JSC, Economic Research Institute, Astana, Kazakhstan;
2JSC, Kazakh center of public and private partnership, Astana, Kazakhstan;

3Pennsylvania State System of Higher Education, Astana, Kazakhstan;
4JSC stana-Project, Astana, Kazakhstan

Abstract

The mathematical formulation of a problem of market balance of levels of pro-
duction, employment, the income and the prices is considered. The new market
model of work which focuses economy on the end result is constructed. It be-
comes clear why development of market forces of work and the capital in economy
branches, contrary to desires of businessmen on accumulation of competitiveness
of the enterprises, happens according to laws of development of market economy.
Keywords Equlibrium; Balanced Growth; Table Input-Output; Model; Laws

1 Introduction

The analytical work to assess the costs and benefits of the regulatory impact on
the development of the national economy was successfully carried out in Europe
and in other developed countries. Appropriate tools in Russian-speaking coun-
tries are known under the following names: regulatory impact analysis (RIA)
and Regulatory Impact Assessment (RIA). The ability to analyze the influence
of the regulatory impacts on the economy, and to use them in the evaluation of
scientific and technological changes in the economy, is very useful for developing
countries.

If we study the regulatory impact analysis tools on the development of the
national economy, it is possible to distinguish two types of them. The first type
of regulatory impact influences on macroeconomic indicators,and the second type
of regulatory impact influences on the performance of enterprises at the microe-
conomic level. The first one mainly influences on the cost of capital, in the form
of money, while the second one has an impact on the cost of capital, in the form
of the product. It should be noted that changes in the cost of capital in the form
of money, and the cost of capital in the form of the product are measured with
units of national or global currency banknotes.

The President of the Republic of Kazakhstan NursultanNazarbayev in his ar-
ticle “The Fifth Way”, which has been written during the crisis of 2007-2009,
marked the presence of the third type of regulatory impact influencing on the
level of development of the national economy[1]. The “Fifth Way” demonstrates
the necessity of an objective assessment of the social and economic subsequences



Advances in Systems Science and Application (2015) Vol.15 No.4 393

of those three types of regulatory impacts. The conclusion that appears from the
logic of the “Fifth Way” is to ensure the mutual consistency of the indicators
of all types of regulatory impact that have a crucial importance in determin-
ing the true value of money capital in macroeconomics and the true cost of the
commodity-capital in microeconomics.

This principle of mutual consistency of regulatory impacts defined in the “Fifth
Way” has become the foundation of the concept of building cross-sectoral assess-
ment models of levels of production market balance, employment, incomes and
prices developed by the initiative group of Kazakhstan in early 2010. Thus, the
initiative group of Kazakhstan in 2010, sparing no effort and energy performed
the implementation of the ideas proposed by the President of Kazakhstan on the
assessment of the influence of economic governance policies not only on the true
cost of capital in the form of money, and on the true cost of capital in the form
of the product. This initiative group reviewed in detail the basic principles of
market economy management models associated with the name of Keynes, mon-
etarists and Mundell-Fleming[2].

As we know, those models are now extensively used in the analysis of the
market economy development. Firstly, it appeared that the main indicator of
market forces analysis of capital in the form of money in all those three models
is a nominal GDP, and the main indicator of market forces analysis of capital in
the form of goods – a real GDP in the Keynesian and monetarist models, GDP,
and according to purchasing – power parity in the Mundell-Fleming model.

Secondly, the Kazakhstani initiative group has proved that the principles of
building models of the monetarists and Mundell-Fleming have a single macroe-
conomic root which was defined by a known Keynesian theory of the equation of
demand and supply for the goods and services. Since the principles of all those
models of economy analysis and management have been developed with the use
of the system of the same macroeconomics indicators which had been created by
Keynes.

Thirdly, it was discovered that in the system of equations of market balance,
created by Keynes and his followers, there is no microeconomics indicator: all
models of the economy analysis are based on macroeconomic theory and are not
related to microeconomic theory and microeconomic indicators.

Fourthly, it became known that Keynes is the author of separation of a uni-
fied indicators system of the national economy, which was defined in the classical
economic science, in the part of macro- and microeconomics.

Fifthly, it is determined that all of those models are based on the one assump-
tion between the capital in the form of money and the capital in the form of
the product. Keynes has based his principle of construction of his model on the
macroeconomic stability of the prices for goods and services, and the monetarists



394 S.Baizakov, A. Oinarov, J. Yi-Lin Forrest and N.Baizakov: The Market Laws Declaration...

– on macroeconomic stability of the money turnover velocity, but Fleming and
Mundell – on the macroeconomic stability of the national currency exchange rate.

Consequently, representatives of the initiative group during the formation of
the Kazakh model of economic management had a reason to accept the hypothesis
of a possible omission of Keynes made in the course of a single economic system
breakdown on macroeconomics and microeconomics, and to mark the uncritical
attitude of monetarists as well as of Mundell and Fleming towards this omission.

2 The Market Laws Declaration of Economic Development of the Countries
Worldwide

There are no words that all of those models were popular management tools of
market economies of that time, this can be proved by the sustainable develop-
ment of the world economy until 2007. However, Keynes in due time determining
the indicators of macroeconomics used the method to minus the material costs
from sales of goods and services. And he created a new macroeconomic indicator
called the gross domestic product. This arithmetic operation allowed the au-
thors of macroeconomic theory to get rid from microeconomics indicators. As a
result, in the study of the cost of the financial capital are mainly engaged macroe-
conomists, and with cost of commodity capital - microeconomists.

As it became known much later, after Keynes, the determination of the solve
equations of mutual dependence of the final result of the production from the
gross sales of goods and services does not require arithmetic but deeper calcula-
tions using matrix algebra. The searches of the Kazakh initiative group showed
that the foundation of this dependence is determined by the system of equations
describing the dependence between macroeconomic and microeconomic indica-
tors as follows[3]:

By economic sectors–

t(i)X(i)− T (i)Y (i) = ±Θ(i), i = 1, 2, ..., n

By national economy–

c ≡ t

T
=

Y

X
,

where t(i)= L(i)
X(i)– time spent by the people themselves, in relation to one tenge,

received from the sale of goods and services by economic activity, expressed in
hours, days, months, years;

T (i) = t(i)B– the total time spent by people on the job, per one tenge, received
from the sale of goods and services by economic activity, expressed in hours, days,
months, years;

tX = L– National Fund of working time, calculated by gross domestic product
(X) is determined by the balance of the time model of inter-sectoral working



Advances in Systems Science and Application (2015) Vol.15 No.4 395

people, expressed in man-hours per year, man-days a year, man-year, people a
year;

TY = L– National Fund of working time, calculated by the volume of the
end product (Y) is determined by the balance of the time model of inter-sectoral
working people, expressed in man-hours per year, man-days a year, man-year,
people a year;

TiYi − tiXi = Θij– the difference between the cost of working time, defined
in terms of the final product (Y) and the working time defined in terms of gross
product (X), expressed in man-hours per year, man-days a year, man-year, people
a year;

B = (E−A)(−1)– inverse matrix of the full costs of the Kazakhstan economy,
as determined by inter-branch model, where A - the technological matrix of the
economy of Kazakhstan by types of economic activity, and E - special algebraic
matrix units.

The final result of the analysis of the regulatory impact on the development
of the national economy of Kazakhstan is the difference between the growth rate
of capital in the form of money in macroeconomics and of capital in the form of
goods in microeconomics:

ċ

c
=

Ẏ

Y
=

Ẋ

X
,

This difference arises from the opposite direction of capital flows in the form
of money and of capital in the form of the product which have different flow
rate. It can be called the coefficient of scientific and technological change, as it
has appeared, as a manna from heaven, from the ceiling, with strict equality of
the working time spent on the creation of the end product (Y = C + G + I +
NX) in macroeconomics and gross domestic product (X) in microeconomics. So
that, this difference is a net contribution of scientific and technological progress
determined by the difference between productivity of the end product and pro-
ductivity of GDP.In other words this success comes from within the country’s
economic system determined by its interdisciplinary development model.

Now we can explain any innovative initiative which is linked to scientific and
technological changes in the national economy not only by an abstract definition
of “scale” production or Solow residue, but by the cost spent on the production of
specific working hours, the specific productivity of labor and capital, the ratio of
scientific and technological progress. In addition, every entrepreneur can perform
the same calculation for each type of their economic activity.

Now, the true value of the national currency can be estimated by dividing the
rate of scientific and technological changes on the GDP deflator, and the index
of inflation will be determined by a formula which is different from the formula
of the GDP deflator. The system of laws of the market economy determined
due to the coefficient of scientific and technological change, includes the following



396 S.Baizakov, A. Oinarov, J. Yi-Lin Forrest and N.Baizakov: The Market Laws Declaration...

related equations:

• equation of the law determining the overall impact of stimulating scientific
and technological improvements – c(t):

c(t) = Y (t)/X(t)

• equation of the law determining the purchasing power of money – pp:

pp(t) = (c(t) ∗ i2(t))/i1(t);

• equation of the law determining the prices of goods and services
– pc(t)=1/pp(t):

pc(t) = 1/pp(t) = i1(t)/(c(t) ∗ i2(t));

• basic law equation determining the real volume of the end product, mea-
sured by the real cost of capital in the form of money, as an indicator of
real economic growth – i3(t):

i3(t) = pp(t) ∗ i1(t);

• basic law equation determining the real volume of the end product, mea-
sured by the real cost of capital in the form of goods as the benchmark of
real economic growth – i3(t):

i3(t) = c(t) ∗ i2(t);

• equation of the law of general price deflation – b(t):

b(t) = c(t)/pp(t) ≡ i1(t)/i2(t);

• equation of the law determining the net benefits of stimulating scientific
and technological improvements – dc(t)%:

dc(t)% =
ċ

c
=

Ẏ

Y
=

Ẋ

X
.

It should be noted that the index i1(t), is the rate of growth of gross domestic
product for the price of the current year, while the index i2(t) - the price of the
previous year.

progress of the US economy and China for 2002-2011 according to the input-
output balance of these countries.

As the table shows, in the period from 2002-2008, both countries were charac-
terized by trends to reduce the cost of capital in the form of money (Y), which
falls per unit of capital in the form of goods (X) .This means that both countries,
return on equity, in the form of money decreased, rates of STP were declining
trend. This situation lasted until 2009 flesh. In spite of the substantial difference
in the level of indicators of scientific and technological progress, the two countries
after the crisis of 2007-2008 has a regulating effect on the level of the coefficient



Advances in Systems Science and Application (2015) Vol.15 No.4 397

of NTP so that stop further depreciation of the national currency.
But they have different approaches. For example, in the United States since

2009 have been lowered growth rate of the cost of capital in the form of money
and the cost of capital in the form of the product, so as to achieve better rate
of scientific and technological progress. In China, by contrast, produced faster
growth rate of growth capital in the form of money, compared to the growth rate
of capital in the form of the product.

Table 1 Comparative assessment of indicators of scientific and technological
progress of the US economy and China for 2002-2011 according to their input-
output balance (mM in USD).

Years

USA China

End product
(Y)

Gross
product (X)

NTP Coeffi-
cient=Y/X

End
product

(Y)

Gross
product(X)

NTP Co-
efficient
=Y/X

2002 10416078.53 18873334.93 55.2 1324753 3794147 34.9
2003 10938122.88 19828498.07 55.2 1485275 4457621 33.3
2004 11736535.23 21264711.1 55.2 1760018 5372764 32.8

2005 12549008.41 23072266.04 54.4 2001206 6527490 30.7
2006 13280785.08 24479922.11 54.3 2354040 8160175 28.8
2007 13844412.73 25795266.08 53.7 3019764 10740915 28.1

2008 14214545.69 26565031.96 53.5 3951859 13913136 28.4
2009 13775598.08 24802899.21 55.5 4538041 15149965 30
2010 14230107.43 25810105.94 55.1 5401801 18070490 29.9
2011 14770666.86 26918120.33 54.9 6777332 22271025 30.4

Source: developed by the author based on the table “input-output” of these
countries.

3 Discussion and Conclusion

Now when we already know the trends of scientific and technological progress,
which are determined by the correlation between the two main indicators of the
market economy, namely, between the cost of the end product, which expresses
the cost of capital in the form of money and the value of gross domestic product,
which expresses the cost of capital in the form of the product, you can do strong
statement: the law of scientific and technological progress and related laws of the
market economy are a reflection of objective processes occurring in it, and they
are independent of the will of the people. No one in the world can not change or
cancel them.

Therefore, people can only identify, understand and learn these laws. Do not
consider their actions in the practice of economic management - equivalent to
curb the development of a market economy, its inhibition of further liberaliza-
tion. This is to ensure that the laws of market economy, equivalent to the laws
of natural science and nature. I can even say so that a natural disaster happens
in one place, in one country, and the collapse in the developed economies as a



398 S.Baizakov, A. Oinarov, J. Yi-Lin Forrest and N.Baizakov: The Market Laws Declaration...

contagious disease spreads rapidly on the economies of developing countries.
Therefore, science and technology indicator changes justified by the Kaza-

khstani initiative group, as the law of the market economy, is suitable for use in
the analysis of the economies of all countries of the world. And it will be best
if we call these economic laws system tools capable for economic analysis and
regulatory impact assessment models such as the Keynesian model, the mone-
tarists and the model of Mundell and Fleming. This is due to the fact that any of
these models is reduced to the particular case of the following generalized equa-
tion, Kazakhstan proposed an initiative group to assess the actual final product
anywhere in the world, including even such large countries like the US and China:

pp ∗NGDP = c ∗RGDP (A)

This indicator measuring the end product is significantly different from the
nominal gross domestic product (GDP), real GDP and the GDP determined by
purchasing-power parity, which are included in the current model of Keynesianism
deystvuyushie, monetarists, Mundell and Fleming. Model (A) determines the
power of the final product, used in the country and consists not only of the
domestic product of the country, but also its product to come from external trade
turnover. The new indicator measuring economic growth is the development of
money equilibrium assignment (pp * NGDP) capital level of trade (with * RGDP)
capital. It is the final product, and not the nominal (NGDP) and real GDP
(RGDP), let alone the GDP determined by purchasing power parity, is a tool for
sustainable development of the national economy and the real measure of well-
being of its people.

The measure defined by the equation of market equilibrium (A), is common
for the economy and the economy of consumption of goods and services, as well
as for the economy of the monetary and financial system. It is a new measure,
adapted to the level of development of the productive forces of labor and capital
in a globalized world economy.

It can be used to assess the regulatory impact on the economic development
of any country, any region of the world, since the value is the true purchasing
power of the national currency, and the value is a measure of realindicator of
scientific and technological change.

This measure determining indicators of scientific and technological changes in
the past never been used and is a new phenomenon in the development of world
economics. And because the core of this declaration on market laws of economic
development of the countries of the world is the progress in economic science,
especially in the science of economic management, which are hidden multibillion-
effects from the use of reliable tools of the regulatory impact.



Advances in Systems Science and Application (2015) Vol.15 No.4 399

References

[1] The fifth way, (news), september 22, 2009.

[2] Y. Hasanli, S. Bayzakov, V. Valiyev, G. Sarsembaeva. (2011), “Modeling
of the multiplicative effects of opening of the work places on the bases of
‘Intersectoral labor balance’ (on example of Azerbaijan and Kazakhstan)”,
EcomodAzKz Full Pape eng.

[3] Ba�zakov S. (2014), “model of the labour market, based on the final
product”, science and innovation, No.12, pp.31-34.

Corresponding author
Sailau Baizakov can be contacted at: baizakov37@mail.ru