Defining Example: The Global Economy
System: The global economy is composed of a system of entities including: raw resource providers that provide “out-of-ground” resources (e.g. mining, labor); resource converters who convert one set of resources into another (e.g., automobile manufacturing, labor); resource movers who transfer resources from one to the other (e.g., firms, markets); and resource consumers who use resources for personal consumption (e.g., households). These entities rely on a set of enabling sub-systems that include: physical infrastructure systems (e.g., power, communication, and transportation networks); economic market systems providing the structured mechanisms for linking providers, converters, and consumers with each other; financial and monetary systems providing the store of value, medium of exchange, and lines of credit necessary to operate and make structural changes to the economy; and intra- and inter-government political policies and agreements providing short-run and long-run government incentives and constraints with sweeping impacts on how a country’s economy operates both domestically and internationally.
Environment: The environment includes the natural world from which resources come and to which spent resources ultimately go; the social and political realms of the human sphere may be relegated to the environment or not, depending on the problems of interest.
System of Systems: Each of the entities that compose the global economy and each of the enabling sub-systems upon which they rely are systems in their own right.
Complex: Each entity in the global economic system makes independent decisions about its use of enabling sub-systems, whether it be sectorally (which specific resource), inter-temporally (acting now or acting later), or regionally (which provider). These decisions directly and unilaterally affect the internal operations of enterprises and households, regional and national markets, and the behavior of the subsystems that support the economy, in ways that, due to this high-level of autonomy, yield emergent behavior.
Adaptive: To remain economically viable, enterprises and households must constantly adapt their use of resources, their purchasing behaviors in markets, their use of financial assets and liabilities, and their response to actions of governments. Because many economic resources are easily transferable (regionally, sectorally, and inter-temporally), the prices of these resources (cost of gasoline, cost of food, interest rates) generally serve as critical public information that travels through the economy very rapidly, potentially broadly affecting the economy in the matter of hours to days.
Aspirations: A global economy that is agile, responsive, and “self-healing” to man-made and natural disasters, i.e., resilient; where the standard of living over the course of individuals’ lives improves; the removal of poverty.
Approaches: Institutions working to establish economic resiliency have a limited set of tools for deploying public economic policy (e.g., using the national federal funds rate to control national unemployment), but have few if any tools for understanding how national and global economies are affected by domestic disruptions. Application of all possible approaches, from observation, experiment, design, control, and manipulation to modeling, is needed to gain perspective on this system.
Attainability: The tremendous scale of this CASoS will require an enormous effort to collect and normalize data, build and validate models, etc. Because person-to-person influence is an undeniable local mechanism that affects economic actions at the lowest scale (the individual), some aspirations at higher scales may not be attainable (such as some forms of predictability). Management of the global economy to yield global benefit will require application of incentives and constraints at all scales and across a diverse set of local to national entities.