Click here for a complete slide presentation.
The Cambiant Model
An Economic Tool for Environmental Policy
A Dominican University of California/Rathmann Family Foundation Project
One of the main limitations in evaluating the impacts of economic and environmental policy has been the nature of economic modeling. Many mathematical economic models, such as models based on the concept of efficient markets and rational agents, depend on generalizations and simplifications that do not reflect real world constraints. These models make the evaluation of resource utilization and environmental effects cumbersome. At Dominican University of California, work has started on the Cambiant Project, an Econophysics development program, to build an economic simulator that will be more useful for evaluating environmental and economic policy.
A New Approach to Econophysics and Economic Models
The Cambiant Project is based on a fluid dynamics modeling concept developed by J.R. Hulls that derives economic performance from a physical analogy based on the properties of airflow over a cambered or curved surface The output of the model is used to drive a modified aerodynamic simulation program to produce a dynamic simulation of an economic structure flying through an atmosphere of potential transactions. This form of simulation allows rapid evaluation of stocks of capital and natural resources versus flow, either of cash or rate of resource utilization. The name ‘Cambiant’ is derived from the Latin ‘cambiare’ for ‘to trade or exchange’ and from the aeronautical term ‘camber’
Use of the Cambiant Model
The Cambiant model was validated through comparison with Congressional Budget Office data from 1979-2007. The model was then used to perform a comparison of the US and Swedish economies over the same period. Dominican Green MBA students produced several initial study cases focusing on renewables, ecology and resource independence.
The Cambiant Model and simulation makes experimentation much simpler than mathematical models, since the simulations do not have to be over-constrained (i.e. assumptions of rational agents or market equilibriums) to produce informative results. For instance, in one simulation, the model was run with all variables except for the variable representing the decay in the quality of debt fixed, allowing the study of specific market conditions. The model produced a dynamic result, which mirrors market performance from the crash of 87 through 2007. A particular interesting characteristic of the model is that it shows the importance of income distribution as a major factor in economic performance.
Cambiant Model Project Progress and Next Steps
Progress on the model and simulation has been very gratifying, showing the ability to reproduce historic data, as well as modeling economic effects such as market bubbles, stagnation and cyclic behaviors. The results of this work are shown in the Cambiant model presentation, which contains videos of the simulator output as well as the flow over a cambered surface that drives the model. The output of the simulation was used to drive a visual flight simulator model, making it possible to literally fly the markets through an atmosphere of potential transactions.
The next stage in the program’s development will refine the model and enable fully scripted runs of the simulation with complex interactions to make the model more useable to a wider section of users. This will enable more sophisticated modeling and simulation of such factors as variable rates of resource depletion and their market demands and other such more complex relationships by development of ‘toolboxes’ that plug into the simulation program.
The project and its team also are indebted to the Rathmann Foundation for an initial seed grant, and to Dominican University and their participants for their support in developing the model and simulation.
Contact Info: Lauralee.Barbaria@dominican.edu 510-862-8447
The Cambiant Economic Introductory Video