Theory of economic models for forecasting and policy

Abstract

The present study is an attempt to build a fairly detailed description of the complete economic system as a working, living organism. The ultimate goals toward which the work is pointed are prediction, policy and economic health and welfare. This study makes two steps toward that goal. It firstly attempts to describe how the total organism works, by studying its major functional organs one by one, and then putting these together into an interrelated whole. This whole and its parts we may refer to as a complete 'model' of the macro-economy. The second step is to describe how this model can be used as an aid to economic forecasting, and the formulation of global economic policy. This requires a theory of the ultimate causes of economic change, of their prediction, and of the prediction of their impact and transmission through the economic system.