International Futures (IFs)

An Overview of Structural Design

March 2004 Barry HughesUniversity of Denver

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Outline: An Overview of Structural Design

1. Foundations: Motivation, Purposes, Assumptions

2. Design Drivers: Desired Characteristics

3. Design Decisions and Elements: Generic

4. Design Details: Issue-Area/Module Specific

5. Vision for Evolution

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Foundations: Motivation and Purposes

1. Tool for understanding long-term global change

Education Insight

2. Tool for exploring human leverage in pursuit of key values/goals:

Freedom and Human Development Humans as Individuals

Social Capacity for Peace/Justice Humans with Each Other

Sustainable Material Well-Being Humans with Environment

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Design Drivers: Desired Characteristics

1. Global (With Regional and Country Detail)

2. Integrated, Multi-Issue

3. Long-Term

4. Data and Theory-Based

1. Interventions Possible

2. User-Friendly

3. Accessible/Available

4. Transparent/Open

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Design Decisions/Elements I: Modules, Example Links

Economic

Socio-Political

Population

Agriculture Energy

EnvironmentalResources and

Quality

International Politcal

Labor

Demand, Supply,Prices, Investment

Resource Use,Carbon Production

Land Use,Water

GovernmentExpenditures

Conflict/CooperationStability/Instability

FoodDemand

Income Networking

Technology

March 2004

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Design Decisions/Elements II: Components

Components Explanation Implications (Good; Bad)

Key Dynamics

Equilibrium-seeking and disequilibrium-causing

Non-linear behavior producible; Analysis and tuning necessary

Dominant Relationships

Agent-class behavior by households, governments, firms when possible; aggregate when not

Leverage points accessible; Eclectic, evolving formulations necessary (estimations, stylized facts, algorithmic)

Accounting System Foundations: Stocks and Flows

Population; Land; Capital; Goods/Services; Assets/Liabilities; Materials; Knowledge

Intervention consequences meaningfully tracked; Data/structure intensive

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Design Decisions III: Characterizing/Implementing

1. “Structure-based, (increasingly) agent-class driven, dynamic modeling” Not systems dynamics (but use stocks/flows) Not econometrics (but use estimation) Not optimization (but can explore for strategies)

2. Implemented with recursive, difference equations Not analytic solution or comparative statics (but can

pursue equilibrium and represent disequilibrium)

3. Substantial interface with many intervention points Not trivial to use (but can implement scenarios and

drill-down)

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Design Details I: Demographics

Components Demographics Implementation Details

Key Dynamics

No equilibration stabilizes population. Long-term fertility rates, life expectancy, and peaks of HIV/AIDS are uncertain.

Base patterns adjusted to UN forecasts; scenarios used for uncertain patterns.

Dominant Relationships

Fertility rate primary. Life expectancy secondary.HIV/AIDS a wildcard.

Fertility and mortality (life expectancy) are cross-sectionally estimated functions of GDP/capita with additional time-shift terms; need to extend driver set (e.g education level). HIV/AIDS is algorithmic, using approach of UNAIDS.

Accounting System Foundations: Stocks and Flows

Cohort-component age-sex structure with births, deaths, migration.

22 age-sex cohorts to age 100+. Separate age-sex, fertility and mortality distributions.

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Design Details II: Goods and Services Production

ComponentsGoods and Services Production Implementation Details

Key Dynamics

Mostly a positive feedback loop driven by other modules/models, including demographic, government spending, energy..

Human capital growth can accelerate economic growth; energy constraints can dampen it; interstate technology flow can diffuse it

Dominant RelationshipsGrowth of multifactor productivity.

Algorithmic, multi-component representation of endogenous productivity growth, with inputs from human capital (education, health), social capital (economic freedom), physical capital quality (energy prices), global technology diffusion.

Accounting System Foundations: Stocks and Flows

Multi-sector production, driven by capital and labor stocks, accumulated productivity .

Cobb-Douglas production function, using disembodied multifactor productivity.

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Design Details III: Goods and Services Market

ComponentsGoods and Services Markets Implementation Details

Key Dynamics

General equilibrium model (GEM) structure pursues target inventory levels; changes in prices provide signals to production, consumption, trade, and investment.

Equilibration uses PID controller and is not tuned to create standard cycles.

Dominant Relationships

Production from detailed formulation. Sectoral consumption function is price responsive. Trade is price, exchange-rate responsive.

Division of consumption uses LES. Trade uses pooled, not dyadic approach.

Accounting System Foundations: Stocks and Flows

Multi-sector supply and demand, using inventories as balancing stocks; production and imports increment stocks while consumption and exports decrement them.

Six sectors using dynamic IO matrix.

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Design Details IV: Finance

Components Finance Implementation Details

Key Dynamics

Domestic equilibration around debt levels of government. International equilibration, using exchange rate indices, around international debt levels.

No equilibration around household debt or wealth.

Dominant Relationships

Government expenditure levels and patterns. Division of household income between consumption and savings. World Bank flows across countries and to various target uses.

Government expenditure levels respond to GDP/capita; patterns of use respond to many forces. Division of income is a function of GDP/capita (should add permanent income overlay); structure should move to household utility with time-budgets including leisure.

Accounting System Foundations: Stocks and Flows

Social Accounting Matrices (SAMs) for flows, tied to underlying asset/liability stock representations.

Representations of households (skilled/unskilled), governments, firms and rest of world (ROW). ROW representations, balanced globally, include FDI, equity, aid, and IFI flows.

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Design Details V: Energy Resources

Components Energy Resouces Implementation Details

Key Dynamics

Resource exhaustion ultimately constrains replenishment of fossil fuel reserves.  

Dominant RelationshipsRates of discovery and rates of production.

Algorithmic formulations determine discovery rates and larger module determines production.

Accounting System Foundations: Stocks and Flows

Non-renewable resources use "McKelvey's Box" with discoveries/extensions increasing reserves (a stock) and production decrementing them.

Fossil fuels are oil, gas, coal.

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Design Details VI: Energy Production

Components Energy Production Implementation Details

Key Dynamics

Reserve depletion constrains production of fossil fuels, while technology change drives renewable costs and production.

Reserve/production ratio minimums implement reserve constraint.

Dominant Relationships

For non-renewable energy forms, capital-output ratios fall with technology assumptions and rise as reserve/production ratios fall. For renewable energy forms capital-output ratios fall with technolgocical assumptions. Investment levels respond to price/profit signals.

Largely algorithmic formulations. Technological assumptions mostly exogenous, but some learning by doing.

Accounting System Foundations: Stocks and Flows

Capital stocks and capital/output ratios drive production of energy, by type.  

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Design Details VII: Energy Markets

Components Energy Markets Details

Key Dynamics

Partial equilibrium model, driving price changes fundamentally by capital costs of energy, marked up by market-clearing signals from inventory/stock levels.

Physical production, consumption and trade override monetary calculations in goods and services submodel.

Dominant Relationships

Production depends on capital stock levels and capital/output ratios. Demand responds to economy size, income levels, and price signals. Trade responds to local demand/supply balances and price signals.

Reserve and capital dynamics determine fossil production. Capital dynamics determine nonrenewable production. For elasticities on demand side, look to other literature. Trade is algorithmic.

Accounting System Foundations: Stocks and Flows

Inventory stocks drive price changes and signals for equilibration.

Multi-energy-type model with production capacities by energy type and aggregated energy demand and trade. Fossil fuels are oil, gas, coal. Renewables are nuclear, hydro, and other renewables.

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Design Details VIII: Land Use

Components Land Use Details

Key DynamicsCropland costs increase as more is developed.

Forest land area is derivative from agricultural and urban use patterns.

Dominant Relationships

(De)development of crop land driven by investment in agriculture and relative costs of increased yield and land conversion. Increased urban/developed land driven by population, income. Algorithmic formulations

Accounting System Foundations: Stocks and Flows

Total land allocated across categories.

Categories are crop, grazing, forest, urban/developed, other.

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Design Details IX: Food Production

Components Food Production Implementation Details

Key Dynamics

Maximum yield specification constrains yield, while technology change drives it upward.

Ideally should tie maximum yields to biological (photosynthetic) maximums.

Dominant Relationships

Short-term production responds to profit signals dependent on equilibrating prices relative to production costs. Investment levels respond to price/profit signals.

Largely algorithmic formulations. Technological assumptions exogenous.

Accounting System Foundations: Stocks and Flows

Capital stocks, agricultural labor supply, and technoology drive crop yields. Livestock herds drive meat production.

Yield has Cobb-Douglas form with accumulated, disembodied technology term. Total production requires multiplication by land.

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Design Details X: Food/Agriculture Markets

Components Food/Agriculture Markets Details

Key Dynamics

Partial equilibrium model, driving price changes fundamentally by capital costs of production, marked up by market-clearing signals from inventory/stock levels.

Physical production, consumption and trade override monetary calculations in goods and services sub-model.

Dominant Relationships

Production from its own module. Demand responds to population size, income levels, and price signals.

Demand for food ultimately derived from calorie demand. Per capita calorie demand related to GDP per capita by cross-sectional estimation and is also price responsive. Some calories from meat, also related to GDP per capita, but additionally to initial (cultural) patterns.

Accounting System Foundations: Stocks and Flows

Multiple types of food type with production capacities, demand, and trade by type. Inventory stocks drive price changes and signals for equilibration.

Crops and meat are primary distinction, but fish also tracked.

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Design Details XI: Environment (CO2)

Components Environment: CO2 Details

Key DynamicsFully determined by accounting calculations.  

Dominant Relationships

Flows of CO2 from carbon fuels and de/reforestation.

Energy submodel determines fossil fuel use and land module of agricultural submodel determines forest changes.

Accounting System Foundations: Stocks and Flows

Atmospheric CO2 stock is augmented or decremented by releases from fossil fuel use, deforestation, and uptake by oceans/land.  

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Design Details XII: Environment (Water)

Components Environment: Water Details

Key Dynamics

There are none - feedbacks from a comparison of water demand with freshwater supply (exogenously given) could be developed.  

Dominant Relationships

Agricultural production and GDP/capita level determine water demand.  

Accounting System Foundations: Stocks and Flows

There is no stock accounting of water, but there could/should be one involving aquifers.  

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Design Details XIII: Values/Culture

Components. Values/Culture Details

Key DynamicsChange tends to be mostly monotonic and gradual  

Dominant RelationshipsValue change is driven by GDP per capita.

Cross-sectional estimations and inertial elements are used.

Accounting System Foundations: Stocks and Flows

Cultural value patterns of older generations are treated as relatively stable stock and values formed by coming-of-age generation as flow.

Two orthogonal value dimensions and one aggregate dimension of WVS project are used. In computing values for non-surveyed states in preprocessor, cultural region is used along with GDP/capita and economic structure.

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Design Details XIV: Education

Components Education Details

Key Dynamics

Similar to population dynamics, but driven heavily by governmental spending on education. Differentiation into three levels of education with specification of years in each leads to saturation of total years of education at highest levels.  

Dominant Relationships

Incremental educational years as functions of drop-out rates and of educational expenditures.

Drop-out rates and basic educational expenditures estimated cross-sectionally.

Accounting System Foundations: Stocks and Flows

Stocks of the educated, by years of education, parallel age-sex distribution of population; incremental flows are tracked by year of education and decremental flows through death.

Currently gender differentiations are not maintained, but they will be added.

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Design Details XV: Democracy

Components Democracy Details

Key Dynamics

Determined by underlying variables, all of which tend to change slowly and usually monotonically. Drivers and therefore democracy saturate.  

Dominant Relationships

Democracy driven by some combination of GDP/capita, survival/self-expression, and education years.

Use Polity and Freedom House measures of democracy.  Estimations are cross-sectional.

Accounting System Foundations: Stocks and Flows Not stock based.  

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Design Details XVI: Human Development

Components Human Development Details

Key DynamicsThat of underlying indicator components  

Dominant Relationships Standard index calculation

Components for index come from assorted sub-models. 

Accounting System Foundations: Stocks and Flows

Derivative from life expectancy, education, GDP per capita. Only education is directly stock-based.  

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Design Details XVII: State Failure

Components State Failure Details

Key Dynamics

That of underlying drivers, mostly slowly, monotonically changing.  

Dominant Relationships

State failure, by type, is a function of some combination of infant mortality, democracy, trade openness, education levels, and GDP per capita.

Cross-sectional estimation with attention to longitudinal patterns

Accounting System Foundations: Stocks and Flows

No stock character, but formulation uses initial values as inertial foundation for change.  

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Design Details XVIII: Interstate Threaat

Components Interstate Threat Details

Key DynamicsThat of underlying drivers, mostly slowly changing.  

Dominant Relationships

Interstate threat driven by contiguity, power relationships, democracy levels, alliance patterns, territorial dispute existence, trade levels.

An algorithmic formulation is based on stylized facts from other estimations, buttressed by some estimations for the project.

Accounting System Foundations: Stocks and Flows

No stock character, but formulation uses initial values as inertial foundation for change.  

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Vision for Evolution of World Modelingfor Long-Range Analysis

1. Data foundations

Extend data import techniques to formal links to multiple databases (create meta-database)

2. Formulations Extend transparency and

openness into on-line, collective development with libraries of formulations, modules

3. Institutionalization of team Kernel updates

1. Accessibility Web-based

2. User-Friendly Simplified interface with

building-blocks for scenarios and packaged scenarios

3. Strategy-Search Tools CARS/IFs