The Obama Economic Plan-An Agent Based Model

Our new President will be sworn in Tuesday.

His first priority will be to "fix the economy".

Unless someone in his circle knows about agent based modeling and other complexity science and actuarial tools, he will fail.

The current plan appears to consist of the following as the next "phase" of the "stimulus/bailout":

$550 billion for infrastructure, science, energy, and education programs over two years.
$275 billion in tax cuts for businesses and consumers.

Sounds good.

But has anyone done a cost-benefit analysis of how this spending in conjunction with the other $2.8 trillion in government spending will transition us toward a sustainable future of fiscal wealth and harmony?

We want it to be easy. Just pick out a few programs and, boom, economic nirvana.

Not.

We've tried that.

Now we are $60 trillion in the hole (Don't forget Social Security, Medicare, Veterans benefits...), are adding about a $ Trillion a year, and GNP is tottering as global resources decline.

If some measure of GNP doesn't start to grow dramatically, game over.

Happily, there is hope. In the labs of Los Alamos, Santa Fe, Batavia, Champaign, Ann Arbor...models have been developed which can definitively show how expenditures can ripple through a global economy and which can test alternative approaches.

We can use these models to find stimulus and bailout programs which could actually create an engine of economic growth for the U.S.

These models didn't exist in the 1930's, so trial and error had to happen in the real economy. We can now simulate the economy and test various scenarios. That way we can have a sense of long term welfare effects of whatever expenditures are deemed worthy.

Isn't it worth the effort?

The alternative is to keep randomly throwing money at a system which has proven itself incapable of meaningful transition.

Our production systems, housing systems, transportation systems, healthcare systems, financial systems, education systems, welfare systems...are all interconnected.

All must be transformed simultaneously for real change to occur and real welfare to be increased

Are we up to the task?

Yes we are.

For more go to paradigmactuaries.com

Lee