An Alternative Approach To Regional Economic Income: A Fuzzy Logic Model of BEA Economic Areas

Abstract

This thesis examines the policy problem of economic unit definition from the perspective of the regional economist. The regional economist faces the challenge of disaggregating macroeconomic activity into subparts that accurately reflect the actual economic organization of a country or region. Such an exercise is important because the Governments of many developed countries rely on it to allocate scarce public resources. In the United States, the Bureau of Economic Analysis of the U.S. Department of Commerce is responsible for regional economic unit definition. To meet its mandate, the BEA has developed a complex assignment system based principally on commuting flows between regions of the Country. This assignment system works well for the centralized population centers that characterize the majority of the U.S. economy. However, the BEA system is less effective at reflecting the economic organization of rural areas, where there is little interregional commuting. To address this problem, the BEA has developed a practice of using newspaper circulation data as a proxy for economic organization. In this thesis I develop a partial set model of regional economic organization based on the mathematics of fuzzy logic and propose it as a superior alternative to the BEAs method.