In response to the urgent global challenges of climate change and rising inequality, the need to re-evaluate our traditional economic models and adopt new approaches focused on sustainability, wellbeing, and inclusion has become evident. The current economic paradigms, based on equilibrium thinking and GDP-centric measurements, have proven inadequate in addressing the intricate interplay between economic, social, and environmental dimensions. As we embark on a transformative journey towards a sustainable and equitable future, it is crucial to adopt diverse modelling approaches to provide policymakers and stakeholders with
informed decision-making tools.
This report delves into the analysis of five different macroeconomic model types (general equilibrium models, macro-econometric & input-output models, stockflow-consistent models, integrated assessment models, and system dynamics models), evaluating their respective strengths and weaknesses to propose an integrated framework that encompasses the multifaceted nature of our world. A
key recommendation is to improve existing models by enhancing their dynamics and feedback loops between dimensions and systems, thus better reflecting the interactions and effects of different social and economic policies. Striking a balance between complexity and transparency is essential, ensuring that models remain flexible and capable of linking with models with greater detail but narrower focus.
The report emphasizes the incorporation of WISE accounts (detailed data on Wellbeing, Inclusion, Sustainability, and Economy that will be collected and harmonized during the project) into macroeconomic models as an opportunity to overcome the challenge of data availability, which poses a significant obstacle in modelling endeavours. Robust and reliable data sources are crucial to the success of any model and require continual improvement in data collection processes.
To broaden our understanding of the dynamics of WISE dimensions and the potential impacts of policies, integrating alternative perspectives, such as heterodox economics, can offer valuable insights. Co-creating quantitative analysis with stakeholders enhances ownership and uptake of the models and may help with bridging the gap between research and policy implementation.
Furthermore, an integrated modelling framework that accounts for the non-linear interactions between human and earth systems is necessary to properly assess policies tackling 21st century challenges in the context of WISE dimensions. This integrated model should draw upon the data of WISE accounts and synergize elements of Input-Output models, System-Dynamics, and Stock-Flow consistent models to provide a structured tool for policymakers and researchers in shaping a sustainable and inclusive future
