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Governmental experts discuss application of modern mathematical economic methods and computer techniques to economic research
C4~VERNMENTAL EXPERTS D~SCUSS APPLICATION OF MODERN MATHEMATICAL ECONOMIC METHODS AND COMPUTER TECHNIQUES TO ECONOMIC RESEARCH
Barbara F. Sundberg Only in the years immediately following World War II did mathematical methods come to be considered seriously as a tool in economic policy-rnaking. Since that time the mathematical model and the electronic computer have become increasingly essential to the analysis of p?,st treads, the projection of feasible and de~rable paths for future development, and the weighing of consequences of alternative economic decisions. Although the United Nations Economic Comafission for Europe (ECE) has engaged in a number of relevant activities in recent years, it felt that further efforts should be made to extend the use of t a e ~ tools both in cconornJc plarming and policy-rnakh~g and in corporate rreanagement. In this spirit the Commission adopted a resolution, in 1967, and a decision, in 1968, calling for a meeting of governmental experts in this field. This meeting was held in Geneva from February 24--28,1969. Its purpose was to consider ways m which activities relative to mathematical economic methods and computer techniques can~ed out under the auspices of the Commission could most usefully be strengthened and broadened, in preparing for the meeting, the E×ecutive Secretary consulted with exi~th~g national institutions active in these fields, including the Bra~islava Computing Research Centre and the Rome Computing Cenh'a. Consultations were also held with UNESCO. The meeting wa~. attended by experts from 21 ECE countries and by representatives of the ILO, UNESCO, and the OECD. The discussions brought to light many opportunities for international cooperation in this domain. Special attention was drawn to activities in the areas to which ECE governments have #ve~ highest priority. Such areas include macroeconomic planning and prograrerning, international trade projections, di~seremation 314
WINTER 1969
315
of infornmtion on science and technology, and operational r e s e a r c h d e s i g n e d to increase the efficacy of enterprise management. The main work of the meeting consisted in the elaboration of recommended projects to be included in an overall work program. The vafio~s proje¢,s agreed upon can be. grouped into four categories: (1) dissemination of information, (2) semina:,, (3) convening of expert m~efings, and (4) joint and coordix~ated research. The work progj~am adopted at the meeting was later endorsed by the Commission at its Twenty-fourth Session. M e t h o d s suggested for promoting and formulating the dissemination of information on the u ~ of mathematical methods and c o m p u t e r techniques for economic r e , a r c h include clearinghouse activities, standardization of ~;lassification systems, establishment of doct~mentation center, use of computers for s t o r a g e and r e t r i e v a l of information, and exchanges of bibliographies. On the ba~,fis of these broad suggestions, two specific projects were formulated. The first is a pilot experiment in the standardization of the description of mathematica~economic methods, terminology (including symbols), and eompt~ter techniques, as a step to facifitate information e~a'langes. The work w,:lt initially be ba~ed on published material submitted by research institutes. In carrying out the study, the Secretariat may al.~so draw on possible background work that may be done to promote the dissemination o f scientific and technologic information. That stud-y, if undertaken, will be made in close liaison w}th UNESCO, and will focus on the major national and ;nternational information systems and on criteria for the optimal structure of information ~ystems in specific fields, emphasizing advantages and disadvan~ges, cos~ versus benefits, and access and utihty of the systems to users. The second project is the organization of e×changes of reports on current research in various interested naiona] research institutes. The procedure for ,:arryiag o~;t .q~e pr~jeei wouM be as tbllo~s: (a) Each year brief reports on ~:ork in progxess or
3i6
EUROPEAN ~ONOMIC RflVIEW
envi~ged would .be submitted by ~ e c t e d institutes. (b)These would be ccnapiie3 and circulated to all participating institutes. (c) From time to time ad hoe studies might also be undertaken, by consultants to the ECE Secretariat, on trends in relevant research activities. The value of training programs lbr specialists i~ these fields v, ~s fully appreciated. Thus, the meeting's pe~ticipaats suggested two ~¢minars that would provide ~n opportutfity fo., economists, e c o n o m e t r i c i a n s , and stafisticiana with varying experience, working in planning bodies or national research institutes, to dismass p r o b l e m s encountered in the use of models in macmeconomic planning and experience in their application m economic planning and decision-making. Special attention would be paid to the contribution that t h e ~ methods and techniques coutd make to the improvement of planning and programming in Earopean developing countries faced with urgent nee d~ for industrialization and achieving economic and social development. The first of these two seminars is tentatively scheduled for the autumn of 1970, in Vama, Bulgaria. The subject chosen is me,into-term models for macroeconomw plan~ing (inch~diag gntersectoral m~!ets). The topic for the second seminar will t~e co~:~dered following evaluation o f the results of the first seminar a~d further consultations with ECE governments. The ~nvening of expert meetings was co~,sidered highly desirable as a for~a for the discussion of recent or possible future developments in tee construction and application of specific types of models used in economic research, planning, and management. The government experts recommended three such. meetings. The first could be a symposium on the application of operational research to enterprise managemenL The second meeting could be devoted to methods for international trade projections -- the scope of*he topic comprising methods for projecting matrices of overall international trad%and{or some important commodities and for projecting price developments in international markets. A meeting on tiffs topic is viewed as a follow-up to an expert meetigg
WINTER 1969
317
on import-export projections held in Geneva in May t 967, and to related work being ,;a,':ried ou ~by the Secretariat. Finally, a third m e e t i n g , to consider ,~t~ods f o r coordinating short-and medmm-term models, wa.~r~c~.::rtm~..nded. Severa! joint or coordin~.ted projects were recommended tha~ are to be carried out by interested national rese~rch ir~stit~tes, with or without the direct participation of the ECE Secreta;iat. Among them is a study on methodology of comparative ar,a~y~s of the e,zonomic s~ructur~ of the ECE countries for projection purpo.~e~ by use of ~nput-output tables. The project would begin with a comparative analysis o,r ~ets of 1959 and 1965 standardized input-omput tables, in national currencies, for a lhnited number of countries. This wotfld be followed by an attempt at reprMng these tab!es in order to improve comparability,. At a later stage these tables migh~ be applied to the ECE Secretariat projection studies (establishment of lirzks between the projectior~s of input-output tables and of international trade matrices). A Secon'd project suggested was coordinated research on physieo-fimmcial medium-term models. Within the scope of this study the tbllowing topics m~ht be covered: links betweeq short- and medium-term models; relations between plan directives and the mechanism of wice formulation; relations in the field of price and income behavior, ~aking into account problems stemming from international competion; integration of financial operations with physico-financial m ~ e l s ; and regulation of medium-term growth through public expenditure and receipt policies. Study of the use of mathematical methods and computers in long-term plamfing was also recomme~ded. This project was discussed further by tlse Second Preparatory Group of Experts for the Seventh Session cf Senior Economic Advisers to ECE Govermnents, which decided that trader this topic two separate studies would be desirable: 1) Methodology of long-term studies in the social area, wtfich would include a revie,a of the difg~rent approaches used in
3 ~8
EUROPEAN ECONOMICREVIEW
long-term planning of social aspects of development, including use of social indicators and methods for projecting related pfivat, and public expenditures. 2) Econometric study of factors influencing long-term growth, i n c l u d i n g e x a m i n a t i o n o f relevant econometric relations incorpQrated in actual models, with particular reference to technical progress and the availability of various categories of skills. The Seventh Session of Seaior Economic Advisers, which has been scheduled for November 1969, will make a final decision on this point.
Barbara F. Sundberg Only in the years immediately following World War II did mathematical methods come to be considered seriously as a tool in economic policy-rnaking. Since that time the mathematical model and the electronic computer have become increasingly essential to the analysis of p?,st treads, the projection of feasible and de~rable paths for future development, and the weighing of consequences of alternative economic decisions. Although the United Nations Economic Comafission for Europe (ECE) has engaged in a number of relevant activities in recent years, it felt that further efforts should be made to extend the use of t a e ~ tools both in cconornJc plarming and policy-rnakh~g and in corporate rreanagement. In this spirit the Commission adopted a resolution, in 1967, and a decision, in 1968, calling for a meeting of governmental experts in this field. This meeting was held in Geneva from February 24--28,1969. Its purpose was to consider ways m which activities relative to mathematical economic methods and computer techniques can~ed out under the auspices of the Commission could most usefully be strengthened and broadened, in preparing for the meeting, the E×ecutive Secretary consulted with exi~th~g national institutions active in these fields, including the Bra~islava Computing Research Centre and the Rome Computing Cenh'a. Consultations were also held with UNESCO. The meeting wa~. attended by experts from 21 ECE countries and by representatives of the ILO, UNESCO, and the OECD. The discussions brought to light many opportunities for international cooperation in this domain. Special attention was drawn to activities in the areas to which ECE governments have #ve~ highest priority. Such areas include macroeconomic planning and prograrerning, international trade projections, di~seremation 314
WINTER 1969
315
of infornmtion on science and technology, and operational r e s e a r c h d e s i g n e d to increase the efficacy of enterprise management. The main work of the meeting consisted in the elaboration of recommended projects to be included in an overall work program. The vafio~s proje¢,s agreed upon can be. grouped into four categories: (1) dissemination of information, (2) semina:,, (3) convening of expert m~efings, and (4) joint and coordix~ated research. The work progj~am adopted at the meeting was later endorsed by the Commission at its Twenty-fourth Session. M e t h o d s suggested for promoting and formulating the dissemination of information on the u ~ of mathematical methods and c o m p u t e r techniques for economic r e , a r c h include clearinghouse activities, standardization of ~;lassification systems, establishment of doct~mentation center, use of computers for s t o r a g e and r e t r i e v a l of information, and exchanges of bibliographies. On the ba~,fis of these broad suggestions, two specific projects were formulated. The first is a pilot experiment in the standardization of the description of mathematica~economic methods, terminology (including symbols), and eompt~ter techniques, as a step to facifitate information e~a'langes. The work w,:lt initially be ba~ed on published material submitted by research institutes. In carrying out the study, the Secretariat may al.~so draw on possible background work that may be done to promote the dissemination o f scientific and technologic information. That stud-y, if undertaken, will be made in close liaison w}th UNESCO, and will focus on the major national and ;nternational information systems and on criteria for the optimal structure of information ~ystems in specific fields, emphasizing advantages and disadvan~ges, cos~ versus benefits, and access and utihty of the systems to users. The second project is the organization of e×changes of reports on current research in various interested naiona] research institutes. The procedure for ,:arryiag o~;t .q~e pr~jeei wouM be as tbllo~s: (a) Each year brief reports on ~:ork in progxess or
3i6
EUROPEAN ~ONOMIC RflVIEW
envi~ged would .be submitted by ~ e c t e d institutes. (b)These would be ccnapiie3 and circulated to all participating institutes. (c) From time to time ad hoe studies might also be undertaken, by consultants to the ECE Secretariat, on trends in relevant research activities. The value of training programs lbr specialists i~ these fields v, ~s fully appreciated. Thus, the meeting's pe~ticipaats suggested two ~¢minars that would provide ~n opportutfity fo., economists, e c o n o m e t r i c i a n s , and stafisticiana with varying experience, working in planning bodies or national research institutes, to dismass p r o b l e m s encountered in the use of models in macmeconomic planning and experience in their application m economic planning and decision-making. Special attention would be paid to the contribution that t h e ~ methods and techniques coutd make to the improvement of planning and programming in Earopean developing countries faced with urgent nee d~ for industrialization and achieving economic and social development. The first of these two seminars is tentatively scheduled for the autumn of 1970, in Vama, Bulgaria. The subject chosen is me,into-term models for macroeconomw plan~ing (inch~diag gntersectoral m~!ets). The topic for the second seminar will t~e co~:~dered following evaluation o f the results of the first seminar a~d further consultations with ECE governments. The ~nvening of expert meetings was co~,sidered highly desirable as a for~a for the discussion of recent or possible future developments in tee construction and application of specific types of models used in economic research, planning, and management. The government experts recommended three such. meetings. The first could be a symposium on the application of operational research to enterprise managemenL The second meeting could be devoted to methods for international trade projections -- the scope of*he topic comprising methods for projecting matrices of overall international trad%and{or some important commodities and for projecting price developments in international markets. A meeting on tiffs topic is viewed as a follow-up to an expert meetigg
WINTER 1969
317
on import-export projections held in Geneva in May t 967, and to related work being ,;a,':ried ou ~by the Secretariat. Finally, a third m e e t i n g , to consider ,~t~ods f o r coordinating short-and medmm-term models, wa.~r~c~.::rtm~..nded. Severa! joint or coordin~.ted projects were recommended tha~ are to be carried out by interested national rese~rch ir~stit~tes, with or without the direct participation of the ECE Secreta;iat. Among them is a study on methodology of comparative ar,a~y~s of the e,zonomic s~ructur~ of the ECE countries for projection purpo.~e~ by use of ~nput-output tables. The project would begin with a comparative analysis o,r ~ets of 1959 and 1965 standardized input-omput tables, in national currencies, for a lhnited number of countries. This wotfld be followed by an attempt at reprMng these tab!es in order to improve comparability,. At a later stage these tables migh~ be applied to the ECE Secretariat projection studies (establishment of lirzks between the projectior~s of input-output tables and of international trade matrices). A Secon'd project suggested was coordinated research on physieo-fimmcial medium-term models. Within the scope of this study the tbllowing topics m~ht be covered: links betweeq short- and medium-term models; relations between plan directives and the mechanism of wice formulation; relations in the field of price and income behavior, ~aking into account problems stemming from international competion; integration of financial operations with physico-financial m ~ e l s ; and regulation of medium-term growth through public expenditure and receipt policies. Study of the use of mathematical methods and computers in long-term plamfing was also recomme~ded. This project was discussed further by tlse Second Preparatory Group of Experts for the Seventh Session cf Senior Economic Advisers to ECE Govermnents, which decided that trader this topic two separate studies would be desirable: 1) Methodology of long-term studies in the social area, wtfich would include a revie,a of the difg~rent approaches used in
3 ~8
EUROPEAN ECONOMICREVIEW
long-term planning of social aspects of development, including use of social indicators and methods for projecting related pfivat, and public expenditures. 2) Econometric study of factors influencing long-term growth, i n c l u d i n g e x a m i n a t i o n o f relevant econometric relations incorpQrated in actual models, with particular reference to technical progress and the availability of various categories of skills. The Seventh Session of Seaior Economic Advisers, which has been scheduled for November 1969, will make a final decision on this point.