Economics as a System


Posted Aug 27, 2010
Last Updated Sep 10, 2010

I am not a scholar of economics, nor practiced in marketing, nor industrial management. My working life began in agriculture, switched to military, then merchant seaman, logger, forester, ecological research…and finally writing science fiction. I'm not even an economics hobbyist, following current debates regarding our "Great Recession." But I was born in 1926, and was an observant child and adolescent in the '30s and early '40s. My earliest specific memory of reading was of a sign held by a hitchhiker in (had to be) 1932 — "if you don't pick me up I'll vote for Hoover."

I was only six years old, but I got his point! Because I was already well aware that times were hard. And I have not forgotten.

Jumping ahead 78 years — we're in the jaws of a serious economic — um, difficulty. And I've been snooping the internet using search terms like "economic depressions," and "20th century American recessions." And finding explanations, and exceptions to explanations, and explanations depending largely on two, supposedly controlling factors…and at least in general on unrealistically simplistic interactions.

Such explanations can be especially misleading when the relationship of, say two of those factors is observably real, but strongly moderated/mediated/cancelled by other, overlooked or neglected factors and interactions. That much is qualitatively obvious. And when independent variables are not independent, which is true more often than not, in economics, or in ecology for that matter. Which seriously hampers the modeling of complex reality.

And when Greed, Aggressiveness, and Self-Justification are important, statistical modeling seems a dubious activity.

In fact, the principal function of existing economic think tanks, it seems to me, is self-justification. So in all seriousness, no kidding, I am herewith proposing an alternative economic model for our new century, based on the functional integration of flows.

Toward an (Overdue) New Model of the Economy

I've been incubating this for months. But I'm getting rickety, and besides senior moments, I have problems key-boarding anymore — tremor compounded by declining coordination and sense of pressure applied. So I'm inclined just to sit and read instead — a pleasure some of us octogenarians (and older) find nicely compensating. But it's sharing time, so here goes!

I propose that someone in a high place — someone with exposure, charisma, energy, resources, and an innovative turn of mind — launch a program to examine and model the world economy — model it as an all-inclusive natural system, and working out how its many elements integrate/interact.

It would begin with a preplanned, open-ended International Economic Year, loosely following the example of the International Geophysical "Year" ( July 1958–December 1959), that initiated a major surge in our understanding of our planet. The proposed Economic Year, however, would have the advantage of the enormous advances in computer science and its availability since 1959, and extensive experience in integrative modeling of complex systems; notably worldwide weather and climate.

The process could start with publicity, and with public expressions of interest by folks like Bill Gates, Warren Buffett, Ted Turner, or Google's Eric Schmidt. Next would come recruitment of an Establishment Team to develop an overall strategy — a team to include specialists in meteorological modeling, and other systems modelers, for their knowledge and perspectives. As well, of course, as mathematically sophisticated economists for their knowledge of the economic landscape.

It might be well if the chair of the establishment team is not held by an economist. Whoever holds it needs to be a free thinking eclectic with a broadly scientific viewpoint and a systems point of view.

Its preliminary product would be a provisional/adjustable table of organization built around multi-layered flow charts, and a core body of guiding policies. It would include a basic strategy; a flexible, easily modified adjustble structure to accommodate expanded knowledge and understandings; and a review group to keep the focus on purposes. While allowing unforeseen paths and areas to be explored.

Initial research would mostly not be closely integrated — much of it might not be integrated at all at first. Developing or recognizing benchmark (baseline) information might be a priority. But it would all be directed at enabling future integration, aiming at a working analog/concept approximation of the global economy.

A diversity of working groups would grow out of this, tasked with analyses and syntheses of global resources and economic dynamics. Always encouraging free "back and forth" within and between teams, with a basic policy of leaving no potential ignored. And always with an eye out for interactions between any and all "subsystems" (how do things seem to flow? how do flows seem to integrate? — and disintegrate!). All while recognizing the whole system as a single, infinitely nuanced, interacting system.

With an operational understanding that the overall product and intended goal is:

  1. a model to generate realistic operating states and parameters for (a) guiding decisions based on available knowledge; (b) enabling realistic education; and (c) helping ask the right questions
  2. a realistic, and so far as possible nuanced understanding and paradigm of the overall dynamics of the "economic universe", with rational explanations
  3. a non-geographic "map" (and sub-maps) of known and suspected interactions, and nodes of potential problems
  4. a "map" (and sub-maps) of the shoals, reefs, currents and undertows endangering "economic navigation," while setting out economic "lighthouses," "bell buoys" and "foghorns" to signal dangerous conditions (this is empirically essential)
  5. effective and enforcable rules of resource use, navigation, and user interactions — the rules of the road
  6. pressure points and protocols for plotting/influencing/steering the infinitude of skiffs, innertubes, kayaks, cabin cruisers, and yachts of non-corporate investment; and the corporate ships and flotillas of large-scale commerce; throughout the economic universe. Including its cultural dynamics
  7. and incidental to all that, greatly improved and more readily accessed knowledge — which we need to survive our century as a currently precarious technological world

"Huh!" you might say, "I hope it works better than meteorological and climatological models." Don't knock 'em, pal. Coupled with informed knowledge of regional and local atmospheric behavior, those models have given us a lot better weather forecasts than we had half a century ago.

I am not a mathematician, but I am aware that mathematics is not infinitely and exactly adjustable to the needs of modeling the real world. Also the economy is far more subject to the vagaries of human and institutional behavior than the weather is — which by itself suggests limitations.

But on the other hand, the primary function of modeling the economy would not (let me repeat myself) would not, WOULD NOT primarily be a prediction model — though it will improve predictions. Because modeling highly complex phenomena results in major improvements in the understanding of the system being modeled; can account for a lot of the total variability; and helps forecasters ask productive questions. And it will free the system from much of the Blackbox Splashback — the results of grossly simplfied economic (or other) paradigms misconstrued as Natural Law (geez, Louise, wake up and look about you!). While reducing the amount of voodoo economics by making economics less dogmatic and more transparent, and helping expose economically destructive activities.

Probably more than one model will eventuate, each with its strengths and weaknesses, its advantages, champions and supporters. We're not talking the periodic table here. We're talking complex cross-strata dynamics infinitely beyond nuclear or molecular strata of function.

At any rate we'll learn a lot about economics. And modeling.