Wharton debuts predictive, interactive budget model

With Wharton’s new interactive budget model, anyone will be able to easily see effects of public policy proposals on things like GDP and unemployment.

Formed by Wharton professor Kent Smetters, the Penn Wharton Budget Model is an interactive, nonpartisan website that allows its users to adjust different factors related to public policy proposals to get an idea of how a proposal will affect the nation in real life, in areas such as employment, GDP, population and old-age dependency ratio.

The model was developed through the Penn Wharton Public Policy Initiative, according to a press release, and aims to help legislators and the public make fact-based, informed decisions about public policy.

“Wharton has been known for focusing on data and data statistics to inform business decisions, so the idea was, why not take those things and apply them to public policy decisions?” Penn Wharton Budget Model Managing Director of Legislation and Special Projects Kimberly Burham said.

The model was started by Smetters around a year ago at Wharton. It was financed by a group of funders, many of whom are Wharton alumni, who “come from all sorts of different political background, from both the right and the left,” according to Burham.

After months of work by a team of over a dozen researchers, analysts and economists, the model’s website launched on June 29.

The project aims to be a transparent and data-powered tool for primarily policymakers in the government, as it is a “very technical tool,” Burham said. It was developed to be non-partisan and neutral on specific policies, focusing only on facts and data for its conclusions.

Burham also emphasized the fact that anyone can use the model for free.

“You get everything” she said. “You don’t have to pay for it, you don’t get access to just one part of it. It’s really trying to be transparent and open-school.”

Currently, the Penn Wharton Budget Model has three modules, or “budget model issue areas” — demographics, Social Security and immigration. Users can test out 4,096 different policy combinations for Social Security and 125 policy combinations for immigration policy, according to a Wharton press release. More modules will be added to the website over time.

“In September there will be a tax module released,” Burham said. “After the tax module we’re going to focus on creating a health care module, and in the future, criminal justice, education, and retirement policy are all in the long term plan.”

In creating the module, the team also checked for historical accuracies in making sure their predictions aligned with what actually happened over time in public policy.

The model will need to be updated from time to time as the fourteen or so government data sources Penn Wharton Budget Model relies on update their information. Policy ideas will also need to be added into the model over time to keep it current and relevant for users.

“We really are bringing in a large number of data sources by using cloud computing to handle that amount of data and bringing [in] big data technology to getting timely results,” Burham said.

But as useful as the Penn Wharton Budget Model is, it, like many other economic and data-based models, must make assumptions about various input factors in order to function.

“There are certain assumptions we have to make in order to project into the future, and we try to make sure that the model is taking reasonable assumptions,” Burham said. “For instance, we have to make an assumption about what interest rates are going to be. So for a lot of that, we try to follow the other models that policy officials use.”

A video explaining the Penn Wharton Budget Model and its background can be found on its website, along with its first three modules that are ready for use.

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