New theory derived from classical physics predicts how economies respond to major disturbances -- ScienceDaily
The concept for the new model is inspired by classical physics: Linear response theory (LRT) explains, for example, how electric or magnetic substances react to strong electrical or magnetic fields. This is known as susceptibility. It can be measured with special devices, but also be mathematically derived from properties of the material. "We show that LRT applies just as well to input-output economics," says Peter Klimek. "Instead of material properties, we use economic networks; instead of electrical resistance, we determine the susceptibility of economies, their response to shocks."
To make it intuitively understandable how economies work, scientists at the CSH employ an interactive visualization tool. It will be constantly fed with new data until the final version should represent the whole world economy.
The tool visualizes the various dependencies of countries and production sectors. "Users can change all kinds of parameters and immediately see the effects across countries and sectors," says Stefan Thurner. A preliminary version, showing Trump tariff effects on Europe, can be seen at https://csh.ac.at/ecores/