THE EVOLUTION OF THE STRATEGIC THINKING

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

This short theme is an attempt to introduce the evolution of the strategy paradigm to provide input for encouraging further discussion to better understanding the concept of strategic thinking and strategy.

 Phase -1

The first phase in the evolution of the strategy paradigm involved “basic financial planning” in the 1950s where the typical planning focus for the firm was the preparation of the financial budget with a time horizon barely beyond 12 months. These organisations tended to exhibit strong strategies however these strategies were rarely documented. The success of the organisation was dependent on the quality of the CEO and the top management team and their knowledge of products, markets and rivals (Gluck et al, 1980). In the literature Drucker (1954, p. 77) drew attention to this issue arguing that it is the role of top management to address the key questions with respect to strategy: “What is our business and what should it be?”

Phase - 2

The second phase of “forecast-based planning” in the 1960s resulted in organisations embracing a longer time horizon, environmental analysis, multi-year forecasts and a static resource allocation as the firm responded to the demands of growth (Gluck et al, 1980). Important contributions to the evolution of the strategy literature were offered in this period by Chandler (1962), Andrews (1965) and Ansoff (1965). In particular Andrews (1965) and Ansoff (1965) were the first writers to address explicitly strategy content and process. Chandler’s (1962) contribution from an historian’s perspective explained the development of large corporations and the way their administrative structures changed to accommodate the demands thrust upon management as a result of business growth. Chandler (1962, p. 13) offered a broad definition of strategy which did not distinguish between strategy formulation and content noting: “Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”

 

Phase - 3

In the 1970s there was a move to the third phase of “externally oriented planning” in response to markets and competition as strategic planning enjoyed the peak of its popularity. Planning in this form included a thorough situation analysis and review of competition, an evaluation of alternative strategies and dynamic resource allocation (Gluck et al, 1980). Prescriptive techniques for strategy were at their peak at this time with the planning school dominant (Mintzberg, Ahlstrand and Lampel, 1998) and numerous simplified frameworks for strategic analysis were put forward mainly by industry consultants. These frameworks included the Experience Curve, the Boston Consulting Group’s (BCG) portfolio matrix and the Profit Impact of Marketing Strategies (PIMS) empirical project.

 

Phase - 4

In the 1980s firm’s embraced what became known as the strategic management phase - the fourth phase - being the combination of the firm’s resources to achieve competitive advantage. This phase included:

1.      A planning framework that cuts across organizational boundaries and facilitates strategic decision making about customer groups and resources.

2.      A planning process that stimulates entrepreneurial thinking.

3.      A corporate values system that reinforces managers’ commitment to the company strategy (Gluck et al, 1980, p. 158).

The strategy process came to be increasingly performed by line managers with occasional assistance from internal strategy experts operating in fewer numbers compared with the past. Initiatives in the field were driven by unprecedented levels of change and complexity confronting organisations (Prahalad and Hamel, 1994) as firms endeavoured to keep pace with environmental developments. At this time there was also a shift from quantitative forecasting to greater use of qualitative analysis (Stacey, 1993). The focus became establishing the firm’s mission and vision for the future, analysis of customers, markets, and the firm’s capabilities (Wilson, 1994).

 Phase - 5

By the mid-1980s it was evident that the changes in the evolution of strategic planning into strategic management were not leading to significant improvements in strategy implementation. In addition, at this time there was apparent a greater sense of the importance of organisational culture and internal politics in the strategic management process (Wilson, 1994; Bonn and Christodolou, 1996). The ineffectiveness of the strategic management process led many experts in the field to emphasise the need for strategic thinking - the fifth phase in the evolution of the paradigm. In this context Stacey (1993, p. 18) observes: “…that although the procedures and analytical techniques of modern strategic management may not be of much direct practical use, they do create a framework for strategic thinking and, it is assumed, managers who think strategically are bound to act more effectively in dealing with the future." That the strategic management process provides a framework for strategic thinking is an important foundation in attempting to conceptualise strategic thinking.”

The evolution of the paradigm from strategic planning to strategic management into strategic thinking reflects the economic, technological and social changes that have taken place since its inception in the mid 1950s, especially since 1984 (Aggarwal, 1987; Prahalad and Hamel, 1994) with higher levels of environmental uncertainty evident placing greater demands on the strategy process in organisations. Indeed, the day-to-day challenges of management bring forth issues that test established frameworks, policies and procedures within organisations designed to deal with them. The major task of managers is to determine when to apply these established frameworks, policies and procedures and when to ignore them and develop new solutions. Strategic thinking facilitates this process (Stacey, 1993).

Subjective knowledge: the Swing of Rationale - Emotion

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

What is the nature of knowledge? How does the mind acquire knowledge?

In the sphere of policy design and the clash of objectivity-subjectivity, it has been always a crucial question to answer “What do we really know?”   

Formerly academia thought of what we call “natural science” an offshoot of Descartes division of the universe in matter and spirit, while it dealt only with the former. Therefore, the study of the mind and its affairs should either fall in the spirit category or; for the sake of remaining objective-oriented; should assume that they behave like classical objects, and possible quantum effects should be negligible.

The quantum theory, though, provides a ground to understand the development of knowledge; it is based on a series of complex mathematical formula which one may find it hard to follow and apply.

An alternative explanation, which is formulated upon the evolutionary theory, gives a preliminary picture to who may have a quest to crack the nut of the knowledge mystery.     

If we assume that a similar law of evolution is responsible for all living phenomena, from the creation of species to the immune system, and we admit that mind is one of them, and then a possible scenario emerges, which is compatible with the latest neurophysiological findings.

Thoughts are continuously and randomly generated, just like the immune system generates antibodies all the time without really knowing which ones will be useful. Thoughts survive for a while, giving rise to minds that compete for control of the brain. At each time, one mind prevails because it can better cope with the situation. Which mind prevails has an influence on which thoughts will be generated in the future. In practice, a mind is the mental equivalent of a phylogenetic thread (of a branch of the tree of life). We are conscious, by definition, only of the mind that is prevailing.

In ancient times the minds generated chaotically were simply yelled to the "rational" apparatus of the brain, which would act as the mediator with the environment: it would translate "illusions/visions" into actions. The result of actions into emotions, and emotions would either reinforce or weaken the mind in control. Emotions would select the mind.

This is more evident in children, who explore many unrelated thoughts in a few minutes: whatever the various minds produce. Later, the adult is better adjusted to select "minds" and does not need to try them all out. The adult has been "biased" by natural selection to recognize the "best" minds.

EU Energy Security and its implication for Ukraine

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

One could think of various reasons for the recent Ukraine tension, but certainly wining political control over the Eurasia faultline isn't the only driving force for Russia's offensive stance, as the coincidence of last year’s energy agreements, between Kiev and the giant energy companies, with the commencement of the conflict is unlikely to be considered a random accident.

According to the U.S. Energy Information Administration Ukraine has Europe’s third-largest shale gas reserve at 42 trillion cubic feet. While for years the giant energy companies have been pressing for shale gas development in Britain, Poland, France and Bulgaria there has been considerably less opposition in Ukraine, a country that has been entangled in gas disputes with Russian in recent years. Gazprom annually supplies more than half of Ukraine’s gas demand, and about 30 percent of Europe’s. Russia has often used this as political and economic leverage over Kiev and Brussels. This leverage, however, came under challenge in 2013 as Ukraine took steps towards breaking its dependence on Russian gas.

According to the New York Times, Chevron signed a 50-year agreement with the Ukrainian government to develop oil and gas in western Ukraine on Nov. 5, 2013, just a few weeks before beginning Kiev’s unrest. The quantities of gas production can probably go beyond Ukraine’s gas needs and the left over can export by 2020. As Reuters stated that the deal for Ukraine and Europe would be a step towards more energy independence from Russia.

It’s in the Donetsk Region, in eastern Ukraine, that Shell signed, in January 2013, a 50-year profit sharing deal with the government of Ukraine to explore and drill for natural gas in shale rock formations.

In another occasion, in autumn 2013 Ukraine’s officials were in negotiations with an ExxonMobil-led consortium to explore for hydrocarbons off Ukraine’s western Black Sea coast. On Nov. 27, the Ukrainian government signed another production-sharing agreement with a consortium of investors led by Italian energy company Eni to develop unconventional hydrocarbons in the Black Sea. In Crimea, giant energy companies including Chevron, Shell, ExxonMobil, Repsol and even Petrochina have shown interest in developing its offshore energy assets. In 2013 these companies have greatly expanded their exploration of the Black Sea off the Crimean peninsula. Perhaps one of Russia’s motivations for annexing Crimea was to ensure that Gazprom will remain in control of Crimean offshore energy assets in addition to ensuring the continued use of Crimea as host to Russia’s Black Sea Fleet.

With much invested of these giant energy companies including those of Russian and the west they are deeply entangled in the Ukrainian crisis. Most likely they will firmly stand to make a profit from these contracts signed by the previous Ukraine’s government and that will influence the geopolitics of Eurasia and Ukraine’s future more than other factors in place.

From Dualism to Triplism: The conflict of Tradition-Patriotism-Globalism

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

One of the characteristics of the ancient civilizations is their belief in the duality that underlies the essence of societies’ worldview. Societies, in general, have the fundamental belief in the conflict of good and evil, light and dark, or two eternal discordant forces. Indeed some civilizations had been constantly showing a permanent tendency for embracing dualism and sowed the seeds of dualism while there were such civilizations of Greece, Babel and Egypt revered polytheism and later middle eastern who practiced monotheism and broke away from dualism.

Monotheism had been founded on and the belief in the unique essence of God and spread throughout the world. The triumph of monotheism over dualism significantly shifted the traditional societies’ worldview. The people who had converted to the new belief had nonetheless preserved hidden or open sympathies and respect for their old faith. This enabled them to transmit the remainders of their old beliefs to the collective memory of future generations. Years after this shift, a culture came into being that was no longer tradition, but based on a synthetic patriotic-global-tradition value system. Although this culture discarded the philosophical duality that was the unifying origin of the traditional thought system, it replaced it with triplism. A new complex worldview equipped a primitive people with the means of overpowering an old kingdom, along with its massive social and political infrastructure.
The dualism required a source which could govern and distinguish between good and bad. It needed a purified mandate who could be appropriate authorities for being that source. They were assumed being wise in order to guide their subjects’ life-affairs and setting justice through societies. The simple logic of “suppression of the weak by the strong” had no longer valid.

With the emergence of the Modern Constitutional system and following the globalization, internal and external strife between “patriotism” and “globalization” and “traditions” was finally compelled to face the two diverging paths: on the one hand, it could not easily detach itself from a tradition firmly rooted in the long history of tension within the cultures. On the other hand, it could see the pleasing outlook of the modernity and international markets. The inescapable introduction of globalization with its values to the societies, and its unquestioned ascendancy over the contemporary world, added a complexity to the cultural mixture that threatened the society traditional identity. Subsequently, the pull toward the modernity and all aspects of modern life, in both thought and practice, has become so powerful that the confrontation between tradition and modernity shapes the discourse in developed and developing societies.

The conflict between modernity and tradition has been; and still; is tense at particular historical junctures.  Yet two conflicting political and social tendencies are at work. One is the endeavors in using a rational method suited to the political realities, and the other is the attempt to maintain the traditions for the sake of keep the nation united. It is evident that both of these tendencies display an extreme factional bias dissociated from collective rationality and the interests of people.

Once again, in the downturn of heydays of the late twenty century, this heritage of duplicity undoubtedly underlies the ease with which societies submit to two entirely divergent styles in life, administration, and interaction with one another.  One thoughtful idea will be needed to introduce new lifestyle without or at least less social status competitions; no matter it roots in traditions or modernity.  

Is Wealth worth Money? The problem with theory of Wealth, Value and Money

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

 

Before getting through my argument, let me set a line of enquiry for this essay, a question that I was asked a couple of days ago:

“One quests a new or an alternative wealth theory which could explain the value of intangible wealth; such as skill and happiness; since the one reads flaws and shortcomings in the existing theory of wealth which formulated in economics.” 

What is wealth in economic jargon? How can one value the wealth? Is wealth an absolute term or relative? Is wealth identified with its value (I mean if one cannot measure values of wealth by scientific ways, the wealth is not worth!!)?

Introduction

The early theory of wealth emerged in order to answer this question: “What is the source of incomes? How are capital surplus of goods formed? It was not a question about “value”. It was an enquiry to find an absolute and continuous source of income not measuring it. For the sake of saving your precious time, please let me explain this part in brief and in the form of bullets as follows

• In France, Francoise Quesney argued that the source of income and surplus is the sun. He developed the first analytical model about wealth (Tableau Economique). He saw farmers as the transformers of wealth and producers of surplus 
• Adam Smith who went to France to study out there, disagreed with his teachers. He came from industrialized England where labor and capital generated incomes even far above the farmers. Smith proposed that surplus arose from the division of labors, which large-scale manufacturers (capital) allowed. In nutshell, Smith talked about productivity and the role of capital in generating it and how this process led to wealth accumulation
• Marx refined Smith focus on labor to say that labor alone was the source of surplus. However Marx’s initial – not his final – argument was that surplus came from labor and there was a gap between the cost of labor and its productivity. This led to what became known as the "transformation problem”, which locked a century of Marxists into an attempt to reconcile Marx’s arguments with linear algebra. 
• The dominant neoclassical theory argued that was impossible to favor one input over the other: both labor and capital contributed to output, and could be smoothly substituted for each other in what they called a "production function”. The problem for neoclassical model (developed by Robert Solow)was that changes in the amount of labor and capital in Solow’s model accounted for less than 50 per cent of recorded growth: the gap, which became known as "Solow’s Residual”, was attributed to technological change – for which neoclassical economics had no theory.

The above historical event explanation reveals how the main issue, searching for source of wealth, disappeared in modern neoclassical economics as the word 'value' was reduced simply to a question of relative prices. But the new problem arises “how relative prices are set” or “How values measure for different types of wealth which differ in their natures”.

Economists define the term of value as functionality of wealth, and scarcity and durability of wealth; by these two definitions they brush away the question on diversity of wealth and reduce the value of wealth to a measureable scale, price / money. Further, they put market mechanism as the medium for determining relative prices where demand and supply face each other.  

From an economic point of view, the value of intangible wealth; skills, knowledge, happiness; can be measured by; the balance between demand-supply of skills, functionality and applicability of knowledge in the markets, and the price of insurance policies for managing risks and consequently remain happy!!

In this sense, wealth maximization is achievable when goods and resources (they assume unlimited resources!!!) are in the hands of those who value them the most; it means someone values a good more, ONLY if he is both WILLING and ABLE to pay more MONEY (or in the equivalent of money) to have it [Dworkin, R. M.; Is Wealth a Value?].

If you disgust with this viewpoint, you are right. One expects theories answer questions not changing questions to fit answers.

 What Heart-Brain may say

To be blunt, my human nature has not been convinced with the existing economic theory for scaling wealth. The theory is far weak to become an ideal model to describe wealth and consequently lead to a robust value assessment method.

Years back, I tried to build a theory upon the theory had proposed earlier by Robert Ayres. The core of my idea was to put energy as an independent factor of production in the neoclassical production function (in addition to capital, labor and technology) in order to enter the limitations which imposed by the second law of thermodynamics in the production model. My intention was to measure a real value for all the production factors (labor, capital, technology).

Although my idea was not welcomed and received with cold shoulders in the course of reviewing my working paper, I learnt that the real value of wealth could not simply be measured by relative prices. There were a few limitations imposed by the law of nature and social behavior of humans.

My point is that the functionality of wealth may vary in its definition in different societies and over the course of time, though the absolute value of wealth can be measured only based on the limitations that the nature puts forward.

The notion of relative price in economics fails to see the whole picture and misleading. 

Conclusions

Our understanding about “social interactions” has locked into perspectives which proposed by the economic theories. Without a multidisciplinary and holistic approach, we cannot expect to find a better theory to explain some truths about the role of wealth in socio-economic-environmental interactions.

Unfortunately, the main stream economists are reluctant to accept non-economic factors entered in to their models. Perhaps they are afraid of complexity or they love status of quo in markets for the sake of easy short anticipations.       

Wealth and Money: Link and delink

By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

There is a question that boggles critical minds “Is it possible to model an economic system in which accumulation of wealth is delinked from money? “. Here I attempt to put few ideas on a piece of paper about few difficulties to doing so.

Money, as a measure to scale wealth

The value of wealth can be measured by any scales. At the middle stage of society development, an equivalent weight of gold or silver was corresponded to the value of particular wealth. As society advanced towards more complex form; may be characterized with the wealth expansions and wealth ownerships; the scarcity of gold and silver resources curbed the human trades and exchange of wealth. Human’s invention of money was a response to eliminate that limitation of gold and silver.

In this sense, money is just a scale; like the one for kilogram; to weigh the value of wealth. Furthermore money facilitates trades. Assume one owns five pens and desires to exchange the pens for a pair of shoes. If the shoes owner has zero interest to acquire pens for its shoes, but needs to trade its shoes for another goods, such an exchange of wealth would be extremely a hard task.

Indeed money, as just a scale and media for exchanging wealth, could make trades easier.

In this sense the volume of wealth should be corresponded with the volume of money with a constant coefficient without causing any problem.

Money, as tradable goods

What I mean by “tradable goods” is that is present the demand and supply for just money; independent from the demand for wealth. But the question could be “what makes demand for money varies over time and independent from demand for wealth?”

I shall analyze the above mentioned question based upon three facts,

 

1.       Persons who wish to exchange their wealth may have not enough money to seal their deals on time,

2.       Some types of Wealth can be quickly converted into cash (liquid) while some types take times,  

3.       The value of wealth alters over time and space.

The first bullet refers to the fact that distribution of money IS NOT corresponding with distribution of wealth. Suppose I have a house which is worth for $1000. It does not mean that I can exchange my house with another asset with similar value. So I may apply for a loan or sell my house in lower price, if I am under enormous pressure to acquire the other asset.

The second fact speaks by itself. Demands for goods vary over products and time (Interests and the concept of interest rates). Again if I have an $1000 house worth, and another person holds a piece of gold of $1000 worth, it is hard to say that we can achieve our desired assets (or dream cars) with spending same amount of time and energy.

The third fact tells us, the value of wealth can be altered by any changes in policy, people’s appetites, social institutions and lifestyle. Therefore it would be a hard task to keep the ratio of the wealth volume with the volume of money in a constant figure (Hard to keep the volume of money related to the value of wealth.)

Conclusion     

Alike all human’s inventions, money brings about together misery and peace. The correlation between money and wealth are deniable as markets for exchanging variety of wealth require the existence of a single media for easy exchanges of wealth. It makes a strong correlation between money and wealth.

The unequal distribution of money (it is natural), the wealth values alternation over type, time and space, and the fact of liquidity create demand and eventually markets for money. There is NO-EXIT from the notion of the money market institution. Money markets will continue to stand warm and speculators will; again and again; generate profits and losses. However central bankers will remain busy with turning up and down the machine of money supply to balance; as they claim! I do not know; economic system.

A Mechanical Economic Model; a review on Ray Dalio’s principles

 By: Shahab Sabahi, Policy Analyst in Energy Security and Policy Research Group

Ray Dalio articulates dynamics of economic growth in three principles; perpetual productivity growth, short time business cycle, and long term cycle. In this sense, he portrays the economics as machines, whose elements mechanically respond and interact to / with each other. His principles appear on two videos, which I checked out; they are reachable at http://www.youtube.com/watch?v=PHe0bXAIuk0 and http://www.youtube.com/watch?v=SFaRazMpxcM . The former has been prepared in an educational format with clear explanations and referred by New York Time. The latter presents Ray’s talks in the “Council of the Foreign Relations”, which is hard to stay with since Ray is a businessman, so he hardly puts his ideas in words, the job that professors/teachers do very well. I recommend watching the former video.

 

What I took away from his principles!

Alike economists who practice business, he tries to generalize the replication of some historical events in a single mental model. He develops the mental model to understand interlinks of historical events and in order to predict futures. His model simplifies a complex system which is inherent with social, political and technical elements, while in effect each element by itself is a complex system. From this sense, one should appreciate his efforts because his simplified model is easy to grasp for non-technical people and even technical persons encourage revisiting their views on economic systems.

Ray in his model takes “the existence of a perpetual productivity growth” for granted!!! He assumes a few small independent markets interact with each other at a higher level (aggregated), the level in which governments / central banks influence the trend of the “market interactions”. Furthermore from his point of view, economies experience two cyclic moves; namely short term and long run; which take place due to governments/central banks influences on credit/money markets by imposing fiscal/monetary policies. 

 

In short, he puts up his economic growth model upon these fundamental assumptions and he concludes such ups-downs is a nature of economic system and he predicts more financial crisis /recovery in the years to come.

 Critique of perpetual productivity growth

Advocators of technology growth may praise Ray’s idea. In his talk, like technologists Ray took the “perpetual productivity growth” for granted (Schumpeter, J., The notion of Destructive Innovation). Despite he gives a description at length about the source of business cycles (cyclic moves) before taking them as assumption, in his simplified model he fails to link business cycle with the productivity growth and does not explain “how to sustain productivity growth in long term”.  One with a background in industrial economics may think of “investments in R&D (research and Development)” as the source of productivity growth which has been theoretically proven (Endogenous Growth Theory; Arrows, K.; Uzawa, H.; Romer, R.). But one may fail to see the underlying principle of the endogenous growth theory which is POLICY measures such as subsidy which has financial consequences on country’s balance sheet. In fact there is a threefold reason that “I do not believe to the notion of the perpetual productivity growth”.

First, theoretically it depends on investment which in turn is subject to business cycle (cyclic moves). It means the productivity growth contributes in both causes and effects of business cycle.

So Ray’s straight line for productivity growth should be teeth-shaped or cyclic-waved.

Second, the empirical data from the “DOT COM” era shows the “effectiveness of investment” in R&D is also matter. Even DOT COM market failed to effectively allocate the investment resources to high-tech activities which rely heavily on R&D activities (same is true in pharmaceutical industries.) It partly stems from the phenomenon of “emergence of asset bubble.”

Third, from an energetic analysis perspective (from the book “biofuels an illusion”), productivity cannot infinitely grow at least in a constant pace. Inter and intra human, capital, and energy replacement are constrained with the capacity of system which means a nonlinear productivity growth trend.

Having the above mentioned arguments, I beef with Ray’s idea of perpetual growth (a British expression of disagreement.)

 

Critique of Ray’s notion of money and credit

True. Changes in the volume of credit and money in the market lead to cyclic moves of the economic growth. Also true where Ray said government’s income sourced from taxes and selling governmental bonds and a central banks was independent from government for controlling the value of currency. But Ray’s model falls short to define three important phenomena:

 

·         Government investments; their needs and effects. Think about them in lights of the fact that private businesses are much capable than governments to allocate investment resources effectively by tracking the market forces (please assume for a moment that there is no market failures; in financial downturns, private businesses are reluctant to invest, even price signals tell the private businesses “Go Ahead” WHY?)

·         Whether short business cycle causes a long business cycles or vice versa or there is no fundamental link between two (Ray jumps over this topic)

·         Consumer saving behavior and its effect on the credit and money markets (Ray’s model cannot capture this non-mechanical phenomenon however Ray talks about only borrowing but not saving.)

 With reducing social systems in general and economic systems in particular to the mechanical systems (as economic modelers do, not econometricians) many phenomena are either excluded from models or their causes/effects are not fully captured. Economic models; from simple to complex ones; tend to be calibrated based on a benchmark. In other words, they are forced to look like the true models. These economic models simplify many behavioral or institutional phenomena to single parameters which in reality are nonlinear variables.

Government bonds, for example, and their effects on the central bank’s balance sheet when the bonds are purchased back by the central bank is a delicate institutional variable which is ignored in Ray’s model and many other models. It could explain why government investments are needed and how far these investments can go.

It also explains the phenomenon of money printing (please note that, there are four monies in economies, printing money DOES not mean increasing the money base). Again it is about balance between spending, earning and value of creating outcome.

 In Ray’s model, it seems that the accumulation of short term business cycles leads to the long term cycle. We should take it with the grain of salt. The latter cycle, if I may use Hegel’s dialectic approach, is a synthesized product of lifestyle changes, political & ideological shifts, markets integration, and evolution of inter and intra society’s relations. Doubtless, the long term cycle is indirectly affected by the short business cycle. In my opinion there is no general pattern for long term cycle as our observation through history goes back only 200 years. But I agree with Ray’s model for the short term cycle and its causes by credit expansion / contraction.

Undoubtedly the saving behavior correlates with fiscal and monetary policies. Increasing tax will reduce the saving level as households’ disposable income slashed and price levels shift upward. A downward move for interest rates would cut the desire for short term saving too as yields are not significant in comparison to alternative investments. But the saving behavior strongly links to the societal demography and institutions.  An aging society with well-structured pension funds tends to buy safe government bonds regardless the movement of fiscal or monetary policies. Such a behavior is hard to be abstracted within a parameter as it varies over time and space.

In addition, the long term behavior of saving / investment links to the prospect of inflation trend which is function of many parameters and hardly influenced by short term fiscal and monetary policies. 

 Conclusion       

Ray Dalio’s principles and idea on the economic system provides an abstract, simple, mechanical and illustrative model. The model introduces very fundamental dynamics of the economic system in very simple language. However it falls short to dig out the realities behinds the evolution of the economic system as a mechanical economic model is far weak to capture underlying socio-political forces.

The linear perpetual growth is a notion that being supported with no empirical evidence. 

Printing money is an abstract and vague term. There are at least four types of money, and in the last three decades no hard currency has be printed in excess in the sense of printing paper.

The Ray’s model provides a nice simplified definition for short business cycle. However it looks over the role of saving behavior and institutions in shaping, intensifying the cycle. The model also mechanically and linearly links the long cycle with short business cycle, which is half true.  The long cycle is a complex phenomenon and with a handful historical data, it is hard to offer a generalized model for them.