QUERY SD model of the US Economy

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Carl Betterton <Carl.Betterto
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QUERY SD model of the US Economy

Post by Carl Betterton <Carl.Betterto »

Posted by Carl Betterton <Carl.Betterton@citadel.edu>

Hi everyone,

Here in the US we are experiencing a financial situation that is less
than happy right now. It seemed to begin, at least in the public mind
and media coverage, with the housing ""melt down"" or contraction of the
housing ""bubble"" and related rapid decline in mortgage industry assets.
It is more complicated than that; as a small example some have said it
was the easy high-leverage credit policies that was an underlying cause.

What I am wondering is this - does anyone knows of a SD model of the US
economy that would have or could have demonstrated to policy makers and
the general public, in advance, the potential outcome to the economy? If
so, was it used and advertised to people? I for one did not see it. This
might have qualified as one of Kim Warren's indicators of SD success.
Such a model would almost certainly contain some of the ""soft"" variables
about which Alan McLucas recently started an interesting thread. And the
recent thread on root cause analysis is also highly relevant.

Perhaps you will point out many SD models, but if no SD model exists, I
suggest we begin to build such a model. Recent discussions of
collaborative model building make me think members of this list could
start such a model and at the same time explore the issues of
collaborative building of a publicly accessible model. I am assuming
that government policy makers and some academics (perhaps in economics)
have built and maintain econometric models. Not quite the same as SD
models, but could be a starting point. This could be a gradual,
long-term project (years) to raise public awareness of SD, learn and
demonstrate collaborative model building, and perform a beneficial
public service. If we can give the project legs, we might even garner
funding downstream to keep it going. There could be counterpart models
for other nations, with linkages. There are so many possibilities it is
hard to believe this has not been done already.

What do you think?

Kind regards,

Carl

Carl E. Betterton, P. E., Ph.D.
Assistant Professor
School of Business
The Citadel
Posted by Carl Betterton <Carl.Betterton@citadel.edu>
posting date Fri, 11 Apr 2008 12:47:13 -0400
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""John Voyer"" <voyer@usm.mai
Junior Member
Posts: 5
Joined: Fri Mar 29, 2002 3:39 am

QUERY SD model of the US Economy

Post by ""John Voyer"" <voyer@usm.mai »

Posted by ""John Voyer"" <voyer@usm.maine.edu>

I'm pretty sure that the folks at MIT have been developing and refining what
they call ""The National Model"" for years. I don't know what kind of access
they provide to other scholars. I know that there have been papers, working
and published, placed in the MIT SD archive.

John Voyer

----------------------------------------------------------

John J. Voyer, Ph.D.
Associate Dean and
Professor of Business Administration
School of Business
University of Southern Maine
Posted by ""John Voyer"" <voyer@usm.maine.edu>
posting date Sat, 12 Apr 2008 08:37:50 -0400
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""Sheldon Friedman"" <sheldon
Junior Member
Posts: 3
Joined: Fri Mar 29, 2002 3:39 am

QUERY SD model of the US Economy

Post by ""Sheldon Friedman"" <sheldon »

Posted by ""Sheldon Friedman"" <sheldon.friedman@comcast.net>

>From Shelly Friedman

In response to Carl Betterton- I use a model of the stock market crash
of 1929 in my class to get students started on the concept of system
dymanics. I had presented this at a pre-confernece meeting at Fordham
University, prior to the New York Meeting, several yaeers ago. The
model is small , but includes things like interest rates, margin calls,
buyers and sellers of stocks, etc. It does not model the economy, but
all you need to do is to change the names from margin to subprime loans,
interest rates are at the center, and replace with stocks with housing.
Its the same set of ""family"" effects. Unfortunately, not being into
finances, I never knew that there was a ""subprime"" market. If I had, I
would have taken action before the problem hit the fan.
Shelly Friedman

St. Joseph College
Posted by ""Sheldon Friedman"" <sheldon.friedman@comcast.net>
posting date Sat, 12 Apr 2008 10:00:00 -0400
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Bill Rathborne <brathborne@sy
Junior Member
Posts: 6
Joined: Fri Mar 29, 2002 3:39 am

QUERY SD model of the US Economy

Post by Bill Rathborne <brathborne@sy »

Posted by Bill Rathborne <brathborne@sympatico.ca>

For at least the past three years, economic commentators where I live
(Ontario, Canada) were expressing grave concerns about the U.S.
sub-prime mortgage market and that it was a time-bomb with a specific
schedule - which happened right on time. I leave it to one's imagination
why the U.S. economic press chose to ignore it!

> Such a model would almost certainly contain some of the ""soft"" variables

Which, in this case, would need to build in ""soft"" variables of the
impact of unfettered cowboy capitalism, greed (is good!), and political
corruption on a massive scale. (A fancy SD model was not necessary to
see this coming.)

> I am assuming
> that government policy makers and some academics (perhaps in economics)
> have built and maintain econometric models. Not quite the same as SD
> models, but could be a starting point.

I recall years ago Scientific American published a wall-chart, ""The
input-Output structure of the U.S. economy"". It was an informative
chart, although a static picture. Certainly a dynamic model that
incorporated a significant portion of mortgage loans, made to families
that could not afford them, defaulting when they came up for renewal,
might have raised some red flags. However, there is more than enough
evidence to suggest that there was a willful intent to ignore the problem.

> There are so many possibilities it is
> hard to believe this has not been done already.

The S&L collapse, Worldcom & Enron, and now - Surprise! - mortgage
meltdown, have all been the consequence of ideology and massive
corruption. Modeling can, in theory, incorporate the consequences.
However, it won't prevent the ""next time"" from happening. In other
jurisdictions where appropriate regulatory regimes have been maintained
these have not happened. SD, and all sorts of other economic/statistical
techniques can rarely prevent or predict outright fraud, a little
diligence can.

Bill
Posted by Bill Rathborne <brathborne@sympatico.ca>
posting date Sat, 12 Apr 2008 14:11:03 -0400
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