Macroeconomic Circular Flow Visualizer — Preview Version Available

Have you ever wanted to control the economy’s leakages and injections to see what would happen to the flows of spending and income?
Wanted to see how GDP falls and the government deficit rises if households increase their rate of saving? (The so called “balance sheet recession” effect).
Wanted to see the increased leakage to the import channel (even as GDP rises) if the government cuts taxes?
Wanted to see the “S-I” identity in the context of other flows?

Now you can visualize these things and more with the

Macroeconomic Circular Flow Visualizer (preview version)

It’s the flow-centric sibling to the stock-centric Macroeconomic Balance Sheet Visualizer. Make sure to mouse over the deficits and surpluses to see the related deficits and surpluses visually highlighted — since all deficits and surpluses must sum to zero! Other diagram elements (e.g., the orange flow ratios) also show extra information when pointed at — and there’s more dynamic highlighting to come.

Here are some possible future features (these are also listed as part of the “more info” section in the visualizer). Please let me know which you think would be most valuable! (I also very much welcome other feedback and suggestions besides what’s on this list… thanks!)

  • Enhanced Scenario Modeling
    • Built in (but configurable) reaction functions between flows — for example a fall in GDP could trigger a rise in government spending due to safety net payments, a fall in investment due to less optimistic sales outlooks, a precautionary rise in the household savings rate, etc.
    • Built in modeling and visualization of macroeconomic capacity (level of unemployment, idle factories, etc).
    • Visualization of changes in GDP that are nominal versus real — i.e., show how capacity is a constraint and inflation accelerates when demand rises at full capacity.
    • Visualization of changing macroeconomic stocks (quantities) such as government debt, and related ratios such as government debt/GDP.
    • Further decomposition and illustration of dynamics between finer-grained sectors (debtor households, creditor households, businesses, etc) including changes in private sector debt.
  • Real World Data
    • Time-animated visualization of real economic data tracking the US economy (and other countries) during important historic episodes.
    • Drill-down from aggregate flows into component flows (e.g., click on “investment” flow to see fixed investment (residential & non-residential), change in inventories, etc).
  • Enhanced Visualization & Presentation
    • Have the graphical flow animations convey visually the relative sizes of the actual flow quantities in the model.
    • Visualization of flow differentials (e.g., economic growth since last time period), i.e., not just total flows.
    • Graphs floating in the diagram next to the flows to show changes over time.
    • Embellishment like animations showing movement between employment and unemployment.
    • Narrated page overview for newcomers — an annotated step-by-step guide explaining how to use the page.

New Tutorial: How Loans Create Money

Here is the first part of a new narrated visual tutorial:

How Bank Loans Create Money — Explained Visually in 3 Minutes

This part covers the very basics, so you’re not likely to learn anything if you’ve followed this topic recently in the blogosphere or used the Macroeconomic Balance Sheet Visualizer… but I hope it might be helpful to those less familiar with the topic. The format also introduces a little more interactivity — the last page lets you create and repay loans, pay interest, and default on loans. I believe the non-video format has more potential than I’ve used it for so far — for example, it could include built in gamification and quizzes.

Part 2 will show the central bank’s involvement — including how reserve requirements, capital ratios, and cash withdrawals do not limit economy-wide lending — and other related topics that distinguish the Post-Keynesian understanding from the mainstream.

Since the How the Economy Works tutorial turned into a bit of a monster (at half an hour of narrated content plus lots of text-only additional details) I’m going to try making new tutorials as short as I possibly can… 2-5 minutes per tutorial seems to me a good upper limit to attempt, but I am happy to have feedback on this (or anything EconViz related!)

Update on Current Tutorial Initiatives

I’ve been taking a break from working on the How the Economy Works tutorial. Thank you to those who shared it with others! However, I’m still having trouble (as far as I can tell) getting it in front of people for whom this content is not already at least somewhat familiar.

To try some new directions, a few weeks ago I started on a much shorter interactive tutorial, “How Loans Create Money“, incorporating balance sheets more centrally into the page-by-page narrated tutorial format in a way that I hope is accessible to more people than those who benefit from the Macroeconomic Balance Sheet Visualizer. Since then, this has become a hot topic in the econoblogosphere, with debates between Paul Krugman, Steve Keen, Scott Fullwiler, and others! It’s very foundational stuff.

Tentative near term plans in rough order of priority:

  1. Finish publishable draft of How Loans Create Money tutorial.
  2. Finish publishable draft of Macroeconomic Circular Flow Visualizer — it’s a bit like the Macroeconomic Balance Sheet Visualizer, but lets you control leakages and injections and view changing flow volumes, deficits & surpluses, etc.
  3. Attempt to bring the How the Economy Works tutorial to a higher professional standard of visual and audio quality to help with potential appeal to newcomers.
  4. After that, there are numerous possibilities for additional tutorial content (and it will get easier as the underlying content engine evolves)… Feel free to make content requests!