Macro Economic Policy Analysis Applications


Oct 28, 2013 (4 years and 8 months ago)


Macro Economic Policy
Analysis Applications

Dr. John Shilling


January 28, 2013

You cannot solve the problem with the same
thinking that created the problem

Albert Einstein


Millennium Institute is devoted to helping
decision makers achieve sustainable

Its Threshold 21 model is an innovative
system dynamics approach to help strategic
decision making

I worked at the World Bank and have been
involved with MI since I retired.

At the Bank, I learned the limitations of
conventional models, which led me to T21

Out of Macro Economic Box

The T21 China model illustrates the
importance of moving outside of the Macro
economic modeling box

It is clear that the economy depends on the
environment and society to function,

So the relations of economic activity with
these areas must be taken into account

This includes addressing externalities, the
commons, and public goods

has many more examples with its
applications of T21 around the world

Moving Beyond the M
E Box

The impacts of economic activity on other areas are
well known

pollution, GHG emissions, resource
depletion, etc. but are rarely taken into account in
the conventional models

The positive and negative feedbacks can be quite
important and reverse expected results

It is important to develop a more complete view of
these activities, even as it adds to complexity

Much can be learned by holding discussions of
these relations among experts in different areas.

S D Modeling Gets Out of the Box

It is based on real world causal relations

The T21 model is adapted to individual
countries based on their particular situation

Local data is the basis for the modeling

Valid local sector models can be incorporated

Local experts are involved to describe the critical
causal relations and

from their sectors,
which expands the scope of the model and
deepens their confidence

Local advisors help define the issues to focus on
and policies to examine in the scenarios



Positive link

Negative link




Causal Diagram Example

Advantages of T21 Approach

Incorporates cross sector relations based
on real world causal relations

Takes account of long term effects, which
may indicate tipping points and ‘cliffs’

Includes impacts of resource depletion,
climate change, population shifts, etc.

Illustrates and compares the effects of
different sets of policies on all indicators to
bring policymakers together

Examples of Its Application

China on energy, food, population, and
GHG emissions

USA on CAFE Standard

Mali on meeting growth targets

Natural disasters in Jamaica

Food security for IFAD

Green Economy for UNEP

USA: Impact of CAFÉ on GDP

USA: GHG Emissions

Examples of Its Application

China on energy, food, population, and
GHG emissions

USA on CAFE Standard

Mali on meeting growth targets

Food security for IFAD

Green Economy for UNEP

Contributions of T21

Learn about important relations in country

Improve data base

Bring together many interest groups to work
together on cross sector issues

Illustrate results of different policies to reach
decisions about policies for common good

Demonstrate values of policies to public

Provide basis for monitoring and evaluation

Application of T21

Identify partners to work with in country,
establish an advisory council, and gather data

Train team of local experts to use and further
develop the model

Create with local team a fully functional model
and transfer it to the country

Examples of many cases on our website:

Thank You for Your Attention

Questions and comments are welcome