Monday, April 13, 2009

A Very Simple GDP Model

In all my free time I've been trying to put together a simple example of how to combine data with models and visualization. This is about as simple as you can get; exponential growth through a fixed rate. The US average growth over the last 219 years appears to be about 3.65% (see my earlier post on Putting the Recession in Context). What's interesting is that that every time we deviated from this average into faster growth, we seem to have fallen back. If you look at the trajectory we were on, it looks like we'll need to fall back to a GDP that is about the size it was in 2006. Now don't call me Nostradamus, but it will be interesting to see where we end up.

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Though that's not the point of this model anyway. In being so simple it is excluding a lot of important details about why the GDP rate has fluctuated the way it has over the last 219 years. Yet this data is available. What I'd like to see is thousands of Google Spreadsheets with data about anything and everything. People could then link the data to models to try and explain particular parts of the behavior. Be it the rise and fall of real estate markets, the steady slide in US education, or the migratory patterns of birds, I think now is the time to open source our theories on what makes things tick.

If we can explain where problems are coming from in a clear and concise manner, share it, and provide feedback then perhaps we can finally come up with better solutions.

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