Full text: Study week on the econometric approach to development planning

count, and their effect on the broad pattern of consumption is 
not very noticeable; but in accounting for the detailed pattern 
they may well be important. In such cases it may be useful 
to follow a hierarchical principle. Thus we might start by 
estimating how, in given circumstances, total consumption 
would be divided among its main constituents, namely food, 
clothing, household expenses etc. We might then try to 
estimate how the expenditure on each of these groups would 
be divided among the group’s components and what specific 
influences, if any, might affect each component. And so on. 
As we got into greater and greater detail, however, we should 
expect any manageable system of demand relationships to 
break down. At this point we should have reached a position 
where our demand model was no longer specific enough and 
where, accordingly, we needed outside help, as in the case 
of the input-output relationships discussed above. 
What I have just said brings out the fact that with the 
information at our disposal there is a limit to the amount of 
detail we can handle. It is sometimes argued that if only we 
could increase the size of our models we should get correspond- 
ingly better results. I do not think this is true. If, for example, 
we were to multiply the number of industries we distinguish, 
and were to represent each industry in the detail necessary to 
operate it, we should have to make the relationships of our 
model altogether more sophisticated. In practice we could not 
do this. I suggest therefore that the proper way to introduce 
great detail into a model of the economy is not to expand that 
model beyond a certain point, but to set up separate sub- 
models for different industries, related to the general model 
but established and operated by the industries themselves with 
all the expert knowledge that this would make possible. The 
final outcome would result from an iteration between the general 
model and the industry models, somewhat on the following 
lines. The general model would indicate the output levels re- 
quired and the distribution of these outputs over uses. The 
[1] Stone - pag. 14

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