The Economics Simulation Project – Part 3

So to summarize, Individuals will go to work and buy stuff based on their profile and rise and fall in relation to the background of Consumers. Individual Profiles include each Individual’s propensity to spend, propensity to keep up with friends, propensity to buy name brand instead of store brand, propensity to save, propensity to buy on credit, etc.  Consumers buy and sell and work as appropriate for their quintile, the 20% of the US households to which they belong.

In 1985, each quintile was approximately 25 million households or about 125 million households. The average number of people in each household varied by quintile from less than 2 to less than three, which puts us up around 270 million people in the US which is approximately correct for 1985.

Now to make the Economic Simulator in any way valid, the other major components of economic society must be simulated: the Government, Vendors, and Producers.  All three of these categories are both consumers and employers. All three of these will grow or shrink according to the economic situation and their long term plans.

The Government is (initially) the easiest to model. They collect taxes from Individuals and Consumers and purchase from Vendors. They also provide employment in accordance with the actual numbers since 1985. For example, in 1985 there were “X” number of non-military government  employees earning an average of “Y” dollars each. Ideally, these numbers will be further refined as research identifies more accurate accounting of employees, such as the number of GS-3 employees at a typical salary, for a particular year.  A specific goal is to get the total number of non-military government employees for each year so the growth or shrinkage of employees is generally accurate over time.

Since Government employment specifically excluded military, there will also need to be an accounting of the soldiers and other direct hires of the Department of Defense. Expenditures for military support (food, housing, transportation, materiel, etc) will also need to be tracked so that increases or decreases in soldiers and operational readiness because of times of war are not invisibly included into Government expenditures and thereby invalidating any analysis of Government expenditures. For example, ramping up the military for a war would cause increased Government expenditures, but if this were not tracked separately, any wars (economically speaking) would be indistinguishable from increased welfare spending or increased infrastructure spending.

Since government budget and expenses are available for the recent past, these numbers will be used whenever possible. Just like the Consumer Price Index breaks down expenditures into 7 or 8 categories, Government expenditures will similarly be broken down into categories. Perhaps it makes sense to break them down into Discretionary and Mandatory spending, as the budget information is frequently broken out this way. Initially, the spending might be broken out into just Mandatory (Social Security, Medicare, etc) and Discretionary broken out into just Defense and non-Defense spending. And then increase the number of categories as reporting needs and curiosity requires.

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