RUM : a Simple Recursive Update Model Providing a Condensed Representation of a Putty-Semi-Putty Vintage Model by

* Special thanks are due to Huub Meijers for checking the algebra as well as the programmed version of the model.1 Introduction In this paper we present an extension of the Quasi-Putty-Putty model and the CRAPP model which were presented in van Zon (1992.D) and van Zon(1993), respectively. CRAPP stands for 'Continuous Recursive Adjustment Putty Putty' model. The latest version of the latter model is called 'RUM' which stands for 'Recursive Update Model', a name which is much more general than CRAPP, but which has a somewhat more 'serious' ring to it. RUM should be part of a larger framework incorporating two other models called 'MASTER' and 'SAM'. 1 The principle reasons why we developed CRAPP and RUM are first that we feel that technological change does not fall as manna from heaven : it must be bought and paid for, secondly that many of the improvements in production processes are linked with embodied technological change, and third that there 'should' be a 'practical way' to incorporate the idea of the embodiment of technological change and the 'technology induced' scrapping of old equipment into a vintage framework, without having to engage in cumbersome calculations involving a complete 'bookkeeping' account of all individual vintages which have come into existence 'almost from the beginning of time'. 2 The RUM model is based on a putty-semi-putty vintage structure, just like the CRAPP model. The principle difference between the CRAPP model and the RUM model is that RUM takes account of expectations regarding future prices and disembodied technological change in order to determine the best course of action needed to be taken today, both conditional on what has happened in the past and 'in response' to what is expected to happen in the future. Thus, present decisions build on decisions taken in the past, and are in line with the anticipations of future decisions. In short, we derive the principal 1 MASTER is short for 'Model for the Analysis of Sectoral Technology and Employment Relations', while SAM stands for 'Skill Allocation Module'. For (some of) the main features of MASTER and SAM, see van Zon and Muysken (1992.A-C) and van Zon (1993).