International Futures (IFs)

An Overview of Structural Design

March 2004

Barry Hughes University of Denver

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 Social Capacity for Peace/Justice Sustainable Material WellBeing Humans as Individuals Humans with Each Other 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

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Design Decisions/Elements II: Components

Components

Explanation Equilibrium-seeking and disequilibriumcausing Agent-class behavior by households, governments, firms when possible; aggregate when not Population; Land; Capital; Goods/Services; Assets/Liabilities; Materials; Knowledge

Implications (Good; Bad) Non-linear behavior producible; Analysis and tuning necessary

Key Dynamics

Dominant Relationships

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

Accounting System Foundations: Stocks and Flows

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) Not analytic solution or comparative statics (but can pursue equilibrium and represent disequilibrium) Not trivial to use (but can implement scenarios and drill-down)
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2. Implemented with recursive, difference equations



3. Substantial interface with many intervention points



Design Details I: Demographics

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

Key Dynamics

Base patterns adjusted to UN forecasts; scenarios used for uncertain patterns. Fertility and mortality (life expectancy) are crosssectionally 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. 22 age-sex cohorts to age 100+. Separate age-sex, fertility and mortality distributions.

Dominant Relationships Accounting System Foundations: Stocks and Flows

Fertility rate primary. Life expectancy secondary. HIV/AIDS a wildcard. Cohort-component agesex structure with births, deaths, migration.

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Design Details II: Goods and Services Production

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

Components

Implementation Details Human capital growth can accelerate economic growth; energy constraints can dampen it; interstate technology flow can diffuse it Algorithmic, multicomponent representation of endogenous productivity growth, with inputs from human capital (education, health), social capital (economic freedom), physical capital quality (energy prices), global technology diffusion. Cobb-Douglas production function, using disembodied multifactor productivity.
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Key Dynamics

Dominant Relationships Accounting System Foundations: Stocks and Flows

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

Design Details III: Goods and Services Market

Goods and Services Markets General equilibrium model (GEM) structure pursues target inventory levels; changes in prices provide signals to production, consumption, trade, and investment. Production from detailed formulation. Sectoral consumption function is price responsive. Trade is price, exchange-rate responsive. Multi-sector supply and demand, using inventories as balancing stocks; production and imports increment stocks while consumption and exports decrement them.

Components

Implementation Details

Key Dynamics

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

Dominant Relationships

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

Accounting System Foundations: Stocks and Flows

Six sectors using dynamic IO matrix.

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Design Details IV: Finance

Components Finance Domestic equilibration around debt levels of government. International equilibration, using exchange rate indices, around international debt levels. Implementation Details

Key Dynamics

No equilibration around household debt or wealth. 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. Representations of households (skilled/unskilled), governments, firms and rest of world (ROW). ROW representations, balanced globally, include FDI, equity, aid, and IFI flows.

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.

Accounting System Foundations: Stocks and Flows

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

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Design Details V: Energy Resources

Components Energy Resouces Resource exhaustion ultimately constrains replenishment of fossil fuel reserves. Algorithmic formulations determine discovery rates and larger module determines production. Implementation Details

Key Dynamics

Dominant Relationships

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

Accounting System Foundations: Stocks and Flows

Fossil fuels are oil, gas, coal.

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Design Details VI: Energy Production

Components Energy Production Reserve depletion constrains production of fossil fuels, while technology change drives renewable costs and production. Implementation Details

Key Dynamics

Reserve/production ratio minimums implement reserve constraint.

Dominant Relationships Accounting System Foundations: Stocks and Flows

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

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

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Design Details VII: Energy Markets

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

Key Dynamics

Physical production, consumption and trade override monetary calculations in goods and services submodel. Reserve and capital dynamics determine fossil production. Capital dynamics determine nonrenewable production. For elasticities on demand side, look to other literature. Trade is algorithmic. 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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Dominant Relationships

Accounting System Foundations: Stocks and Flows

Inventory stocks drive price changes and signals for equilibration.

Design Details VIII: Land Use

Components Land Use Details Forest land area is derivative from agricultural and urban use patterns.

Key Dynamics

Cropland costs increase as more is developed. (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.

Dominant Relationships Accounting System Foundations: Stocks and Flows

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

Total land allocated across categories.

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Design Details IX: Food Production

Components Food Production Maximum yield specification constrains yield, while technology change drives it upward. Short-term production responds to profit signals dependent on equilibrating prices relative to production costs. Investment levels respond to price/profit signals. Capital stocks, agricultural labor supply, and technoology drive crop yields. Livestock herds drive meat production. Implementation Details Ideally should tie maximum yields to biological (photosynthetic) maximums.

Key Dynamics

Dominant Relationships

Largely algorithmic formulations. Technological assumptions exogenous. Yield has Cobb-Douglas form with accumulated, disembodied technology term. Total production requires multiplication by land.

Accounting System Foundations: Stocks and Flows

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Design Details X: Food/Agriculture Markets

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

Key Dynamics

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

Dominant Relationships

Production from its own module. Demand responds to population size, income levels, and price signals. Multiple types of food type with production capacities, demand, and trade by type. Inventory stocks drive price changes and signals for equilibration.

Accounting System Foundations: Stocks and Flows

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

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Design Details XI: Environment (CO2)

Components Environment: CO2 Fully determined by accounting calculations. Energy submodel determines fossil fuel use and land module of agricultural submodel determines forest changes. Details

Key Dynamics

Dominant Relationships

Flows of CO2 from carbon fuels and de/reforestation.

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. Agricultural production and GDP/capita level determine water demand. There is no stock accounting of water, but there could/should be one involving aquifers.

Dominant Relationships Accounting System Foundations: Stocks and Flows

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Design Details XIII: Values/Culture

Components. Values/Culture Change tends to be mostly monotonic and gradual Value change is driven by GDP per capita. Cross-sectional estimations and inertial elements are used. Two orthogonal value dimensions and one aggregate dimension of WVS project are used. In computing values for nonsurveyed states in preprocessor, cultural region is used along with GDP/capita and economic structure. Details

Key Dynamics

Dominant Relationships

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.

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Design Details XIV: Education

Components Education 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. Incremental educational years as functions of dropout rates and of educational expenditures. 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. Drop-out rates and basic educational expenditures estimated cross-sectionally. Details

Key Dynamics

Dominant Relationships

Accounting System Foundations: Stocks and Flows

Currently gender differentiations are not maintained, but they will be added.
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Design Details XV: Democracy

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

Key Dynamics

Dominant Relationships Accounting System Foundations: Stocks and Flows

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.

Not stock based.

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Design Details XVI: Human Development

Components Human Development That of underlying indicator components Components for index come from assorted sub-models. Details

Key Dynamics

Dominant Relationships

Standard index calculation

Accounting System Foundations: Stocks and Flows

Derivative from life expectancy, education, GDP per capita. Only education is directly stockbased.

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Design Details XVII: State Failure

Components State Failure That of underlying drivers, mostly slowly, monotonically changing. State failure, by type, is a function of some combination of infant mortality, democracy, trade openness, education levels, and GDP per capita. No stock character, but formulation uses initial values as inertial foundation for change. Details

Key Dynamics

Dominant Relationships Accounting System Foundations: Stocks and Flows

Cross-sectional estimation with attention to longitudinal patterns

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Design Details XVIII: Interstate Threaat

Components Interstate Threat That of underlying drivers, mostly slowly changing. Interstate threat driven by contiguity, power relationships, democracy levels, alliance patterns, territorial dispute existence, trade levels. No stock character, but formulation uses initial values as inertial foundation for change. An algorithmic formulation is based on stylized facts from other estimations, buttressed by some estimations for the project. Details

Key Dynamics

Dominant Relationships Accounting System Foundations: Stocks and Flows

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Vision for Evolution of World Modeling for Long-Range Analysis

1. Data foundations


1. Accessibility


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

Web-based

2. User-Friendly


2. Formulations


Simplified interface with building-blocks for scenarios and packaged scenarios

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

3. Strategy-Search Tools


CARS/IFs

3. Institutionalization of team


Kernel updates
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