State variables are defined by their associated rates of change. The minimal physical state of a macro economy would entail the level of every commodity in the inventories of every sector. We hypothesize that these levels are resident in a higher order delay structure; that their physical presence, being a sunk cost, is the sufficient inducement to their being used-up in producing the next generation of goods. The physical flows E_IJK of commodities J through the operation of sector I of economy K will be taken as the factor input rates to sector IK’s production function.

As noted earlier, Model 0’s method of price determination cannot proceed until we have set out the economic state upon which prices are calculated. Prices will therefore be considered known for purposes of establishing the asset replenishment rates R_IJK that drive the delay mechanisms in which the economy’s physical state resides. Our neoclassical premise has it that the economic system’s default tendency is toward the general optimum. This tendency will be realized by setting R_IJK to the optimal rate Q_IJK for IK to use J insofar as is possible given the availability of J.