IS model: A general model of forecasting and its applications in science and the economy

Abstract

Expanding the work of Marchetti and Modis on Lotka–Volterra competition systems, a general model of Interaction Systems (IS) is introduced to describe the dynamics of multiple member interactions among different populations concerning not only biological systems but other types of systems as well. The new IS model provides us with a general framework of analysis and forecasting, where all parameters, variables, and interactions have real meaning, by using basic knowledge of each system. The proposed model can be applied to many different fields covering economic, business, social, physical, and other phenomena giving us both numerical estimates and qualitative insights of the system's dynamics. This is illustrated in two case studies. In the first case, the IS model is applied to elementary chemical reactions in order to quantify the reactions' kinetics. The result is the well known rate law of chemical reactions kinetics thus providing evidence of the proposed model's validity. In the second case, the IS model is applied to the global economy. The resulting model is tested against real global GDP data. The new IS model gave reliable estimates and proved to be considerably more accurate as compared to a similar forecast of global GDP based on the logistic growth model. Furthermore, the new model presented a basic framework of understanding the nature of major economic shifts, including the recent global recession of 2009, by studying the dynamic relationship between demand and supply.