Douglas P. Wilson:
"But weather is such a profoundly non-linear system that linearization is either impossible or doesn't help much. We may differ on this point, but I think the world economy is a much simpler system than the world's weather. I don't know any way to prove this other than to construct a simulation and try it, but I'd be quite surprised to see anything like the chaos seen with weather."
I haven’t commented on this discussion because I don’t know the jargon and would have little to add to what has been said about modeling. However, what does bother me is continuous reference to simulating the "world economy" without first bothering to ask whether there is such a thing and whether there is anything left to model. A very very large part of the economic activity that takes place in the world occurs within national boundaries, and a considerable number of analytical and predictive simulation models already exist to deal with such activity. To the best of my knowledge, such models incorporate international transactions. Although I have no direct experience with this, it is probable that some of these models could be linked (or are already being linked) so that what happens in one country could be reflected in the model of another. When one thinks of the European Union, such linking of country models into larger ones would make sense.
I would also question how useful the type of modeling being proposed might be. Would it really tell us anymore than we already know about the Asian meltdown or the economic problems of Russia? Would it really give us more information than we already have (which is not much) about the debate currently underway in China about whether the yuan should be devalued to maintain China’s trade position?
And as for doing the world a great favour by developing a simulation model of the world economy, I would suggest that agencies such as the World Bank, the US Federal Reserve Board, the Bank of Canada, and the Canadian Department of Finance have already done considerable modeling, and, being rather pig-headed, may want to keep building on what they have already done.
I would add, however, that I received most of my education before the age of the computer, and my comments may simply reflect how out of date I’ve become.
Ed Weick
