Simulating the Response of a Small Open Politico-Economic System to International Crises: The Case of Switzerland

This paper applies some traditional management science tools to the study of Switzerland---a small country characterized by the openness of its politico-economic system to the outside world. Despite its apparent vulnerability to external influences, Switzerland has been able to maintain a remarkable degree of stability throughout the political and economic difficulties of the 1970's and 1980's. In order to help understand the main elements of this ability to absorb major international fluctuations as well as provide decision-makers with ways to analyze them and to investigate the impact of other possible developments, a simulation model of Switzerland has been constructed. This model (SIMSWISS) is based on a representation of the most important sectors of the Swiss politico-economic system, with special emphasis on their connections to the outside. SIMSWISS is constructed via a combination of dynamic simulation and optimization techniques which allow its user to check its accuracy as a representation of reality and to engage in the analysis of possible scenarios and alternative policies. An energy crisis scenario is used to illustrate how the model works and how it can be used to understand the functioning of the Swiss politico-economic system. We hope that this model will serve as the basis for a broader use of management science techniques in the study of other politico-economic systems.