The report of the NETIAM workshop on "New multidisciplinary challenges in modelling the business environment" may be downloaded in pdf format by using the link at the bottom of this page. The executive summary of the report is given below.
Through a series of five workshops at different venues across Europe, the European FRAMEWORK 6 project NETIAM (New and Emerging Themes in Industrial and Applied Mathematics), aims to use mathematics in the formulation of unexplored multidisciplinary challenges, to increase awareness of this role across academic disciplines and end-users, and to identify strengthening mechanisms for multidisciplinary collaboration.
In its second Thematic Workshop, held in Ventspils, Latvia on 2-3 August 2004, the NETIAM project explored opportunities for multidisciplinary research under the title ‘New multidisciplinary Challenges in Modelling the Business Environment’. The workshop was attended by some 69 researchers from 9 countries, including social scientists, economists, physicists, and mathematicians.
There were four opening presentations: macroeconomic modelling and econometric models with an input/output core, financial engineering – a new era of modelling, economic consequences of insurance price fluctuation, and the emergence of collective states in economic systems. In these presentations, the participants sought to identify the key challenges and observations that will motivate and underpin any realistic models of the business, socio-economic and political environment.
The immediate result was the decision to separate into four breakout sessions charged with identifying the theoretical framework within which each of the following themes could be considered quantitatively:
- The coupling between macro-economic modelling and social networks
- Risk stochastics in economic modelling (time series)
- Modelling the transition economies
- Socio-political environment, labour, accessibility, corruption
The breadth and diversity of feedback from the four sessions reflected the fact that this is the most ambitious of the four NETIAM themes. It is so large and interdisciplinary that it is a difficult challenge even to identify those topics where mathematicians can add significant value to the methodologies used by sociologists, economists, politicians, and managers. Concerning this challenge, the social science factors that were considered to be crucial to the business environment were:
• transport, communications, labour supply, corruption, leisure activities, human resources/education.
The corresponding economic factors were:
• tax policy, pensions policy, currency value, insurance policy.
The mathematical methodologies that emerge as being best suited to handle this wide range of human activity fell into two categories:
1. Data Management and Statistical Modelling
New directions for this burgeoning area of mathematical science abound in the realm of business risk, where the novelty lies in modelling corruption and mismanagement and in assessing the business implications of social risks such as gambling, health and unemployment. The most promising methodologies are time series and stochastic analysis, but both will be plagued by insufficient data compared to more traditional risk analysis in , say, finance or weather forecasting. A desirable outcome of a research programme based on these premises is the development of new kinds of insurance policies.
2. ‘Ad hoc’ prediction models for the evolution of the business environment
It was absolutely clear that in this wide-open area, the way ahead is via a generalised theory of dynamic network modelling. The basic network structure needs to comprise interlinked nodes, each of which may have a multi-dimensional behaviour involving many socioeconomic variables of which only a few will be coupled to other nodes. The network should be able to nucleate and evolve new nodes, and also to have a learning capability. This is an exciting new direction for the mathematical theory of differential-algebraic systems; but it is not a completely new challenge because two traditional, but very elaborate ‘ad hoc’ network models are already in use. However, they have never been subject to serious mathematical scrutiny and their nodal parameters need to be prescribed subjectively. There is, nonetheless, one reliable paradigm in which the social modelling is represented by a very simple network and utility functions at the nodes describe the econometrics. The development of this paradigm to make it a quality control for the larger codes is an exciting challenge.
Assuming progress can be made with 1 and/or 2 above, the resulting predictions will only be of practical value providing two other quite different challenges are met. Firstly, many social norms/indices need to be quantified before the models from either 1 or 2 can be used to predict optimal policies. Secondly, the research must be explicable in terms that are transparent to policy makers. Neither of these challenges can be addressed by the mathematical community alone but they must both be overcome if mathematics is to make a genuine contribution to this outcome.
The programme of each of the NETIAM workshops is highly flexible, interactive, and responsive to emergent ideas, so distinguishing them from more traditional conference and seminar events. The Firenze and Ventspils workshops have provided insight into the mechanisms and challenges in stimulating ideas for novel multidisciplinary research topics and collaborations; these aspects will be addressed more fully in the subsequent capstone Plenary Workshop in March 2005.
The proceedings and output from the Ventspils workshop are recorded in this report for dissemination amongst the workshop participants and the wider public and research communities. The report is intended as a resource of ideas for future multidisciplinary research activity on the topic of Modelling the Business Environment and related areas. It is also the second of four Thematic Workshop reports which will form the basis of the final Plenary Workshop in March 2005, in which the ideas emerging from the Thematic Workshops will be integrated into substantial themes and collaborations for novel and multidisciplinary research.