Economic Forecasting

Does anyone understand how the world works? If we consider this question to be about the certainty of knowledge behind policy making, then the answer is no. This is because economic theory is central to the governance of modern society, but these current theories cannot be proven. This means that knowledge of economics is not equivalent to that of science, engineering, or medicine. The difference is that scientific theories require proof, whereas current economic theories cannot be proven.

Unfortunately, as economic theories cannot be proven, they cannot be disproven either, so persuading policy makers of the need to change policy requires accumulating a vast amount of evidence. Indeed, we might consider rising child exploitation, loss of biodiversity and global warming to be such evidence, but they still deny this is due to their policies. Problematically, convincing policy makers of the need to change will lead us into catastrophe.

In contrast, if the knowledge of economics were equivalent to that of scientific disciplines, we could be proactive in establishing sustainable, equitable and stable economies. A new approach to economic forecasting is presented in the publications below. At its core are the philosophy of science and the mathematics of engineering. The new approach, called Economy Dynamics, is provable unlike any current theories of economics.

Economy Dynamics Series

Paper 00 Towards a comprehensive macroeconomic simulation capability: Economy Dynamics.

An overview of the Economy Dynamics methodology for macroeconomic analysis and forecasting. Existing economic forecasting methods are limited by the range of values held within the historical datasets used to correlate the model. Thus, extrapolating the semi-empirical function introduces numerical uncertainty into the forecast results. Our new approach avoids the limitation of extrapolating semi-empirical functions by using the mathematics of dynamic systems. This will enable forecasts to be validated against metrics at a regional level such as economic output, poverty levels and inflation and against the environmental impact, which is not currently possible.

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Paper 01 Modelling decision-making from population data: Household Income Forcing.

Household financial decision-making can be captured from population data by using surrogate modelling methods (including AI). The probability of a given financial action can then be modelled under different household financial circumstances by replaying the surrogate model using the revised household financial circumstances. Termed household income forcing this analytical framework requires the economy to be divided into regions based on cost of supplies and local taxes, and households to be separated into economic groups based on their cost of living and financial circumstances. It tests household financial forcing by calculating the difference between household income and running costs, and it evaluates perceived forcing by comparing household income to that of other households. The set of financial decisions a household can make under a given income forcing can be implemented in economic models by using surrogate models of actual household financial behaviour.

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Paper 02 The economy in one equation: The Macroeconomic Primitive.

This paper presents a new approach to modelling the dynamic interactions of consumers and suppliers within an economy. It is developed from the observation that businesses have a pivotal role within the continuous dynamic behaviour of an economy as both consumer and supplier. As all entities within an economy are consumers, it is possible to represent all financial interactions by the consumer relationship to suppliers of goods, services, labour and assets. Termed the macroeconomic primitive, it is represented graphically as a consumer-centred diagram showing the transfer of supplies in exchange for money, revealing that financial transactions are not isolated events but are within a continuum of events. It is also presented as an equation in a general form, defining the interdependency between income and expenditure of any entity within the four consumer types: households, businesses, public purse and charity. The primitive equation can be used to build up the interdependencies of all consumers and suppliers of any economy.

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Economy Dynamics Essays

Essay 01 The emperor's economics: how can we prove economic theories?

This essay considers why no economic theories can provide public understanding of the constraints on economic policy for addressing climate change and poverty. A new approach to economic research is presented and the potential for creating a framework to enable validation of economic forecasts is discussed. This will enable substantial structural change to the economic system and will open up economics to public questioning and enable public participation in political-economic debate.

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Essay 02 The $8 trillion gamble: can we make economic policy fit for purpose?

This paper explains why economic theories used by current policymakers are not fit for purpose and how to fix this. It discusses an approach to economic forecasting that can be validated, unlike current theories, separating politics from economic analysis. This will provide vital information to address climate change, mitigate current economic instability and tackle rising poverty by provably determining the changes necessary to current policies.

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Essay 03 Fixing the global crises: taxing the modern economy

This essay explains the problems of the current approach to tax revenue collection and how we create an effective tax system. Namely, wealth is generated by businesses and not households. Indeed, one measure of the size of an economy, known as national income, is the sum of business profits and the sum of wages paid by businesses. This means that whatever part of an economy is taxed, such as income or household consumer spending, the revenue raised must originate from the wealth generated by businesses, otherwise this drives wealth inequality. A new simple, equitable, self-regulating approach to tax revenue is defined, and a gradual and robust mechanism for implementation is outlined to ensure a stable transition. Crucially, this new system will enable governments to effectively regulate businesses, which is vital if we are to address the current global crises from global warming to the risk of job losses due to the advancement of technology.

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Economy Dynamics Book and Funding

Book 01 Solving the puzzle: provable economic theory.

Economic theories used by policymakers are not fit for purpose. They claim to 'follow the science' but in truth align more closely to a belief system than to scientific methodology. So, if you are scientifically minded you may well despair at the disastrous consequences, to people's lives and to the environment, of current economic thinking. Yet, what is the alternative?

The 'Economy Dynamics' project will create an approach to understanding economy behaviour based on scientific methodology, which includes creating a provable economic theory. Given that the discipline of economics needs a complete overhaul, it's an ambitious project and includes: establishing a new technical language without inherent concept bias due to the use of unnecessary abstract terminology; implementing a framework for understanding dynamic systems, such as those used in science and engineering; and crucially, instilling a different philosophy of knowledge that demands theories to be provable.

As there are no forums or journals in economics to discuss or publish innovation in economic theory, I have published my papers on this webpage and I am writing a book (with draft released on Patreon). The book is intended to convince a general audience that, by following a mechanistic approach to studying economy behaviour, we can prove economic theories. For your support, you will have exclusive access to all works before release, including draft chapters of the book. Let's bring economics into the 21st century.

Patreon Project: Provable Economic Theory

Software architecture for analytical processes

A new approach to the structure of software architecture to integrate analysis software and data in an adaptable and easy to upgrade framework is presented in the Teclab Series publications below. The new approach enables an analysts to select the simulation type, within a single analytical environment, and have full control over the algorithms and options used, without any duplication of software or methods across a department or company. The framework is truly modular, allowing alternative analysis methods to be interchangeable within the simulation, selected at set-up by the analyst. The architecture structure avoids the common problem of analytical tools becoming fragmented and prevents upgrade requirements encountering a dead-end. Implementing our architecture ensures there is no duplication of effort in an analytical processes between staff and that all analysts are working with the latest datasets, reduces data handling errors and reduces analysis turnaround times.

Teclab Series

Teclab 01 Handling data in automated analysis processes.

Presenting a new central data management concept for storing varied data ontologies and ensuring rigorous data access control. Its application within Axsym’s software integration environment Teclab is demonstrated by a case study to automate a road network management analysis process.

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Teclab 02 Automating analysis processes for complex modelling ontologies.

Presenting a new analysis governance concept for intrinsically determining the model call sequence and managing data dependencies. Its application within Axsym’s software integration environment Teclab is demonstrated by a case study to automate local energy system design feasibility studies.

Download Paper: Teclab 02