Hydraulic Macroeconomics 2.0

Wednesday, July 30, 2025, 7:35 AM

Session: Student Plenary (Afternoon, 30th of July)

The Hydraulic Macroeconomics 2.0 (HM2.0) Framework is a systems science model that reinterprets economic flows and structural dynamics through the metaphor of the Earth’s water cycle. By aligning financial and economic behaviors with hydrological concepts such as precipitation (capital inflows), infiltration (local absorption and retention), runoff (capital leakage), evaporation (inflation and value dissipation), and the water table (institutional and social reserves) the framework provides an intuitive yet rigorous method for diagnosing economic sustainability, resilience, and systemic risk. Traditional economic models often overlook how capital behaves dynamically across time and space, particularly its capacity to accumulate, bypass productive use, or destabilize systems when concentrated or mis-allocated. Hydraulic Macroeconomics 2.0 addresses these blind spots by offering a visual and analytical model where capital circulates like water, sometimes nourishing, sometimes pooling in clouds of speculation, and sometimes evaporating into inefficiency or asset inflation. This approach enables analysts and policymakers to identify not only financial flows but also critical leakages, droughts (capital scarcity), and floods (volatile inflows) that influence the stability and equity of economic systems. This framework attempts to map economic vulnerabilities and opportunities across urban, institutional, and policy landscapes. It revealed how local economies may thrive or fail depending on their ability to absorb and retain value, build reserves, and respond adaptively to shocks. Moreover, the model exposes a fundamental gap in mainstream economics, the failure to account for capital’s destructive potential when it overwhelms absorptive capacity or dries up access to liquidity and opportunity. Just as ecosystems collapse under drought or deluge, economies falter when flows are unbalanced or reserves are depleted. By making capital flow visible and relatable through hydrological metaphors, the framework helps build a more systemic, equitable, and regenerative approach to economic policy.