The Economy

As explained in the previous discussion about fuzziness and complexity, fuzzy cognitive maps are suitable to model the behaviour of systems that are too complex and ill-defined to be studied using more classical, "crisp" mathematical methods. Among the systems that show these characteristics economic systems stand out by themselves. It would be great if we could have a mathematical theory that would allow us to make predictions about the evolution of the economy. Unfortunately, such a theory does not exist.

I would like to prepare a fuzzy cognitive map that includes all the factors and relationships that play a role in the evolution of the economy in a Western country. Hopefully, the fuzzy cognitive map should be useful to make predictions about the system. This objective is certainly very bold, perhaps unrealistic. Nevertheless it may be worth giving it a try.

Given my lack of knowledge about Economics I do not have any hope of completing the fuzzy cognitive map by myself. In fact, I believe that this fuzzy cognitive map may be so extraordinarily complex that it will be extremely difficult to complete even for the most able economist. I expect that the fuzzy cognitive map can only be constructed over a long time by contributions from many authors, where the contributions may be additions to the map, removals or corrections to previous contributions.

To get the fuzzy cognitive map started, I have selected a small number of factors that could form part of an economic system: oil price, interest rate, output, growth, consumer spending, employment rate, investment, inflation, taxes, consumer confidence, employer confidence and political stability. I have set their relationships without worrying too much whether they are correct or not. The result is in the figure below.

The figure is incomplete, and the relationships between the factors may be wrong. You may notice that the oil price and the inflation are not related to anything else; I am not sure of how to link them to other factors. The fuzzy map will grow better and better as people contribute to it. In fact, we may end up with several alternative fuzzy maps to represent the same system.

If you wish to contribute to the fuzzy cognitive map please send me an email. You can suggest factors, relationships and intensities for the relationships. The contributors will be credited in this page if they so wish.

As I receive contributions, I will update the figure (or figures) in this page and the preloaded fuzzy cognitive map in the applet, and I will add comments to this page explaining why the fuzzy map is the way it is.