Macrocosm: Modelling the global economy for a sustainable future
From politicians to investors, decision-makers face an increasingly unpredictable and interlinked world. Economic forecasting has long struggled to keep pace, and traditional models often oversimplify the intricacy of modern economies. In the lead-up to the 2008 financial crisis, for example, macroeconomic models failed to give proper warning because the root of the crisis – companies and banks not paying their debts – was too complicated to factor in.
Leaders navigating high-stakes transitions – such as the shift to clean energy – need intelligent decision-making tools purpose-built for the complexity of today’s world. Macrocosm, a spinout from the University of Oxford’s Social Sciences Division, is building those tools.
Founded by Professor Doyne Farmer, a world-renowned economist and expert in complex systems, Macrocosm is developing next-generation economic models that will bring benefits to countries and citizens across the globe. The models simulate the behaviour of real-world companies and institutions, replacing broad assumptions with detailed decision-making logic. Macrocosm models real-world decisions made by companies and investors, simulating how and when they act – not just abstract economic trends. They then simulate that decision-making process using state-of-the-art computer modelling techniques.
Macrocosm’s first focus is the global energy transition and it is already driving change in this area. With support from the Clean Prosperity Foundation in Canada, the team has developed a suite of models to guide Canada’s national energy policy. In Japan, Macrocosm is partnering with insurance company Aioi Nissay Dowa to improve the modelling of supply chain risk, helping the company better price and manage that risk for its clients. A US National Science Foundation grant, meanwhile, is funding Macrocosm’s work on a global energy investment and risk simulation platform.
At the heart of this platform is a 1:1 scale simulation of the global energy system, including companies and the assets they own. Unlike existing solutions, this ‘digital twin’ will be empirically validated using vast amounts of data and embedded with industry-specific domain knowledge. The goal is not just academic insight, but practical impact – building tools that investors, governments and companies can use to make better long-term decisions for the energy sector, with knock-on effects for the economy, the environment, and broader society
Macrocosm, spun out just two years ago with the expert support of OUI, is already working on a range of active projects with international clients. The long-term goal, says Professor Farmer, is to do for economic planning what Google Maps did for traffic planning – to build a global resource that helps leaders make smarter, more sustainable decisions based on how the economy actually works.
Impact
- Supply chain model is based on Oxford University research that predicted the economic impact of COVID-19 on the UK economy with remarkable accuracy (a predicted decline of 21.5% in GDP vs actual decline of 22.1%, Q2 2020)
- Global energy system model is validated using 20+ years of financial and operational data from >30,000 firms and >150,000 individual assets
- Significant interest in Macrocosm’s solutions from some of the world’s largest financial institutions (each with >£300 billion assets under management)
The model we developed in partnership with Macrocosm – drawing on their expertise in agent-based modelling and combining it with Aioi’s advanced data science capabilities – enables us to quantify production risks triggered by natural disasters with remarkable precision.
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