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The Virtual Economy
From: London School of Economics and Political Science
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| The ground floor of the virtual economy with the Chancellor's Office. | |
 ould you run the British economy better than the Chancellor of the Exchequer? You can certainly try. The Virtual Economy (www.bized.ac.uk/virtual/economy) is a website that utilises sophisticated computer models very similar to those used by the chancellor and his advisers to manage the economy and prepare the budget. It strides the heights of interactivity by allowing the user to manipulate the economy using such policy tools as income tax, VAT and government expenditure and to see the results of their economic playmaking. One can wreak simulated havoc with the economy or one can pursue conventional fiscal or monetary policies simply to restrain inflation and boost employment. |
The Virtual Economy was set up in February 1999 at the instigation of the Institute of Fiscal Studies and Andy Berharrel of Biz/ed, a business and economics service for students and teachers, and with financial help from the Nuffield Foundation. According to Graham Stark of the Institute of Fiscal Studies, it originates from three main sources: the IFS Be Your Own Chancellor, the Ready Reckoner from the University of Warwick--a stripped-down version of the Treasury's macroeconomic model--and a collection of teaching materials from the University of Bristol. This cocktail of course material and interactive Web design has been integrated in the format of the Chancellor of Exchequer's own office at 11 Downing Street. According to Graham Stark, "The graphic designer likes his designs to be based around familiar places and objects." The design belies great complexity, as Stark acknowledges: "There's actually quite a lot of detail here and the models are quite powerful. Maybe the nice design disguises this." |
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| The first floor: users investigate the effect of policy on people, business and government. | |
The ground floor of the chancellor's building and the Virtual Economy consists of the chancellor's office, with an introduction and an information bureau containing teacher and student guides and details of the model. Stark points out that "the virtual economy was developed to support teaching A-level students." Indeed, the biggest group of users is A-level students and first- and second-year undergraduates, but it does get quite a lot of "civilian" use as well, especially around budget time. Stark adds, "As of January 2000, the models have been run 150,000 times, including, scarily enough, 13 times on Christmas Day and once at five minutes to midnight on Hogmanay." |
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| The second floor provides economic policies and advisers. | |
Perhaps the secret of the site's success lies in the detail. The first floor of the chancellor's office/Virtual Economy provides a case-study section that allows users to see the effects of various policies on business, government and families. Stark is keen to expand the functions of the Virtual Economy, and he says, "We are very interested in extending the role-playing aspect of the Virtual Economy. We imagine a multi-user version in which people can take on all sorts of roles and a super-Virtual Economy mediates between them." He envisages a virtual environment that tracks the effect of policies on workers from various sectors of the economy, pensioners, home owners, a whole host of economic pawns. |
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| The third floor: economists, theories and glossary. | |
The second floor addresses the next level of decision making, which includes the economic policies. It provides advisers who guide the use of fiscal and monetary policy. All the available policy tools from VAT to government expenditure are explained, and there is an "outcomes" section examining variables ranging from unemployment to debt ratio. Stark acknowledges that the Virtual Economy does not address the effects of external factors such as natural disaster. He says, "We developed the Virtual Economy to a very tight deadline and had to cut a lot of corners and drop many ideas. Improvements are possible in almost all areas." However, he adds, "We are currently addressing some of these as part of a new project. For example, we're producing new simulations which are oriented towards specific tasks, such as attacking child poverty or joining the euro, and we're making the simulations more realistic by, for example, showing the effects of policy changes on large numbers of real households rather than a few invented ones." |
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| The top floor hosts the model: time to test your economic instincts. | |
Yet the Virtual Economy is still impressive in its breadth and depth of detail. The third floor is an extensive library that provides a glossary and resources to examine economic theories and economists. |
The fourth and final floor produces the model itself, and by this time users should be au fait enough with policies, outcomes and aims that they should be able to use the model, see the fruits of their labour and challenge the chancellor with his own weapon. For the range of things the site allows to be modelled, Stark says, the Virtual Economy is "practically identical" to the treasury's model of the economy. But he also adds, "Whether it is close to how the world works is another matter." |
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