Economic models of software engineering and the software maintenance crisis

This paper presents a transdisciplinary study on economic models of software engineering and their formal description. It is recognized that the adaptive equilibrium of market systems is rooted in the negative feedback mechanism of demands and supplies. A mathematical model of economic equilibrium developed in this paper provides a formal proof of Adam Smith's genius hypothesis of 'invisible hand' proposed in 1776. A set of mathematical models is developed for dynamic cost analyses and for estimation of economical outcomes of software engineering projects. A significant phenomenon in software engineering known as the software maintenance crisis is identified, and possible solutions are proposed. The risks and impacts of software maintenance crisis are too high to be ignored when the society is highly dependent on various software systems.