(Bloomberg Businessweek) -- Computer models that evaluate the impact of government policies are mostly behind closed doors, but one is open to anyone: the Penn Wharton Budget Model, a free tool for testing policy ideas housed at the University of Pennsylvania’s Wharton School.
The virtual sandbox, which opened last June, has become increasingly popular, with more than 350,000 simulations run in just the past two months, says Kent Smetters, a professor of business economics and public policy at Wharton and the model’s faculty director. Many testers are congressional staffers, and it appears people from the executive branch are using it as well, he says. There are simulators for Social Security, immigration, and taxation.
The computer model is accessible at budgetmodel.wharton.upenn.edu. Users change settings with moving sliders and drop-down menus. Two simulators, for Social Security and immigration, let people test policy options such as raising the normal retirement age or increasing deportations.
The tax simulator isn’t as flexible yet—you can only study three 2016 tax plans, those of candidates Donald Trump and Hillary Clinton and that of the House Republicans. What you can do with the tax simulator is change economic assumptions. For example, as its default, the model assumes that big federal deficits will cause interest rates to go up, which would slow the economy’s rate of growth. If you’re convinced that foreign investors will buy the increased supply of Treasury bonds and keep U.S. interest rates low, however, you can plug that assumption in instead. “This is really about making informed decisions based on empirical data, not opinion and dogma,” says Smetters, who’s done stints at the Congressional Budget Office, the World Bank, and the U.S. Department of the Treasury.
President Trump, whose ideas are often evaluated, happens to be an alumnus of Wharton’s undergraduate division. “That really doesn’t come up,” Smetters says. “It has no bearing on how we do things.”
On May 2, Wharton announced that the Laura and John Arnold Foundation had committed $6.6 million to give the model more tools, including “more sophisticated algorithms, granular data on corporations, and modeling of global transactions.” Simulators for other subjects, from health care to housing finance, are planned.
Wharton also houses the database powering USAFacts, a project of former Microsoft Corp. Chief Executive Officer Steve Ballmer that went public in April. USAFacts, a trove of data on U.S. population and government, is also intended to help people make smarter policy decisions. Smetters says the projects’ databases will eventually be merged.
For Wharton students, the parent Public Policy Initiative offers special courses, internships, and a public policy case competition. University President Amy Gutmann, a political scientist, is pushing several other public policy initiatives at Penn, including naming former Vice President Joe Biden to lead a new Penn Biden Center for Diplomacy and Global Engagement.
Penn still has a long way to go to catch up with the likes of Harvard’s Kennedy School of Government and Princeton’s Woodrow Wilson School. Wharton’s Department of Business Economics and Public Policy ranks 29th in the world among public policy schools in academic citations of its faculty’s research, according to Research Papers in Economics, a database maintained by volunteers. Smetters says Wharton will distinguish itself by being directly useful to policymakers. “There are other academics out there who could build these models, but that’s not their interest,” he says.
It’s true that business and public policy schools are largely uninvolved in designing and implementing policy in Washington and state capitals. For the most part, the schools are just “professors talking to other professors,” says James Piereson, a senior fellow at the Manhattan Institute for Policy Research. Academics didn’t flag the emerging public pension crisis or Puerto Rico’s pseudo-bankruptcy, among other problems, he says. If Wharton manages to make itself useful through such initiatives as the Budget Model, he says, that would be a good thing. And that’s exactly what Smetters has in mind.
The bottom line: The University of Pennsylvania’s Wharton School wants to become a leader in the computer modeling of public policy.
To contact the author of this story: Peter Coy in New York at pcoy3@bloomberg.net.
To contact the editor responsible for this story: Dimitra Kessenides at dkessenides1@bloomberg.net.
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