Building an economy simulator from scratch(thomassimon.dev)
thomassimon.dev
Building an economy simulator from scratch
https://thomassimon.dev/ps/4
216 comments
I just love whenever the roundworld equivalent of something I first encountered on the discworld pops up in front of me.
:D It goes both ways! Having known about it prior, it was very exciting to read about it in Discworld.
[deleted]
Have never been able to ascertain what model it actually uses e.g. a system of linear equations, if so which ones?
Vividness has its advantages. You could call it a simulator as well as one of the world's first dashboards as well.
This is so cute, love the animation and idea behind it.
Just yesterday I listened to Planet Money talk about how Bill Phillips got a position at the London School of Economics on the strength of his hydraulic computer simulating the economy: https://en.wikipedia.org/wiki/MONIAC
Just yesterday I listened to Planet Money talk about how Bill Phillips got a position at the London School of Economics on the strength of his hydraulic computer simulating the economy: https://en.wikipedia.org/wiki/MONIAC
MONIAC was also featured/satirized in the Terry Pratchett book "Making Money":
__________________
> "Mr. Hubert believes that this... device is a sort of crystal ball for showing the future," said Bent, and rolled his eyes.
> "Possible futures. Would Mr Lipstick like to see it in operation?" said Hubert, vibrating with enthusiasm and eagerness. Only a man with a heart of stone would have said no, so Moist made a wonderful attempt at indicating that all his dreams were coming true.
> "I'd love to," he said, "but what does it actually do?"
> Too late, he saw the signs. Hubert grasped the lapels of his jacket, as if addressing a meeting, and swelled with the urge to communicate, or at least talk at length in the belief that it was the same thing.
> "The Glooper, as it is affectionately known, is what I call a quote analogy machine unquote. It solves problems not by considering them as a numerical exercise but by actually duplicating them in a form we can manipulate: in this case, the flow of money and its effects within our society become water flowing through a glass matrix--the Glooper. The geometrical shape of certain vessels, the operation of valves and, although I say so myself, ingenious tipping buckets and flow-rate propellers enable the Glooper to simulate quite complex transactions. We can change the starting conditions, too, to learn the rules inherent in the system. For example, we can find out what happens if you halve the labour force in the city by the adjustment of a few valves, rather than by going out into the streets and killing people."
> "A big improvement! Bravo!" said Moist desperately, and started to clap.
__________________
> "Mr. Hubert believes that this... device is a sort of crystal ball for showing the future," said Bent, and rolled his eyes.
> "Possible futures. Would Mr Lipstick like to see it in operation?" said Hubert, vibrating with enthusiasm and eagerness. Only a man with a heart of stone would have said no, so Moist made a wonderful attempt at indicating that all his dreams were coming true.
> "I'd love to," he said, "but what does it actually do?"
> Too late, he saw the signs. Hubert grasped the lapels of his jacket, as if addressing a meeting, and swelled with the urge to communicate, or at least talk at length in the belief that it was the same thing.
> "The Glooper, as it is affectionately known, is what I call a quote analogy machine unquote. It solves problems not by considering them as a numerical exercise but by actually duplicating them in a form we can manipulate: in this case, the flow of money and its effects within our society become water flowing through a glass matrix--the Glooper. The geometrical shape of certain vessels, the operation of valves and, although I say so myself, ingenious tipping buckets and flow-rate propellers enable the Glooper to simulate quite complex transactions. We can change the starting conditions, too, to learn the rules inherent in the system. For example, we can find out what happens if you halve the labour force in the city by the adjustment of a few valves, rather than by going out into the streets and killing people."
> "A big improvement! Bravo!" said Moist desperately, and started to clap.
" tax works by pooling a percent of sellers revenue."
What the public servant actually does is impose a tribute on the workers in a denomination the public servant determines. If you don't provide the denomination then the public servant confiscates your assets by force.
The population then offers their goods and services in return for the denomination the public servant issues. The public servant then determines the level of the tribute required by how much of its own denomination it gives in exchange for the tribute.
That's the source of money, and the source of the price level.
There is no 'universal exchange commodity'. Money is really just promises between people.
Fred would say to Jim: "here's a pig, owe me one". Fred now has Jim's IOU as an asset which he could give to Bob in exchange for something Bob made so Bob can claim a pig from Jim.
What the public servant actually does is impose a tribute on the workers in a denomination the public servant determines. If you don't provide the denomination then the public servant confiscates your assets by force.
The population then offers their goods and services in return for the denomination the public servant issues. The public servant then determines the level of the tribute required by how much of its own denomination it gives in exchange for the tribute.
That's the source of money, and the source of the price level.
There is no 'universal exchange commodity'. Money is really just promises between people.
Fred would say to Jim: "here's a pig, owe me one". Fred now has Jim's IOU as an asset which he could give to Bob in exchange for something Bob made so Bob can claim a pig from Jim.
>That's the source of money, and the source of the price level.
The vast majority of money in the modern economy is created by banks, not by the tax agencies or even the mint. When the bank lends you $1000 they just create it out of thin air and credit your account by $1000.
The vast majority of money in the modern economy is created by banks, not by the tax agencies or even the mint. When the bank lends you $1000 they just create it out of thin air and credit your account by $1000.
They still have to borrow the money from the central bank. Fractional reserves mean that the credited account's bank must deposit a portion of the money bank at central bank.
So there is a limit to how much money can the bank create.
So there is a limit to how much money can the bank create.
Mostly banks borrow from depositors and from the capital markets.
Reserve requirements of that type still do exist in some places (though in some places they've been abolished) but don't really play much of a role in determining how quickly money supply grows any more.
Control over money supply growth is mostly down to interest rates these days.
Similarly, the role reserve requirements used to play in protecting depositors has been replaced by the various "Basel" rules which determine what sources of funding banks can use to fund their loans which depend on the loan book's credit quality, tenor etc.
Reserve requirements of that type still do exist in some places (though in some places they've been abolished) but don't really play much of a role in determining how quickly money supply grows any more.
Control over money supply growth is mostly down to interest rates these days.
Similarly, the role reserve requirements used to play in protecting depositors has been replaced by the various "Basel" rules which determine what sources of funding banks can use to fund their loans which depend on the loan book's credit quality, tenor etc.
Banks don’t borrow from depositors.
Loans create deposits and the deposits just change ownership tag from then on.
Loans create deposits and the deposits just change ownership tag from then on.
I mean, they do, to the extent that people walk into banks and hand over wads of cash for deposit. I.e. it happens, but increasingly rarely.
How did you get the wad of cash in the first place and what is it?
A wad of cash isn’t money. It is nothing more than a receipt for a deposit held at an institution somewhere - that was created as an advance in the past in response to an equivalent loan.
When you deposit a wad of cash in a bank, the bank takes ownership of the deposit in the institution and creates a new deposit in the bank for you. It’s just another loan creating a deposit.
A wad of cash isn’t money. It is nothing more than a receipt for a deposit held at an institution somewhere - that was created as an advance in the past in response to an equivalent loan.
When you deposit a wad of cash in a bank, the bank takes ownership of the deposit in the institution and creates a new deposit in the bank for you. It’s just another loan creating a deposit.
A deposit is literally you lending money to your bank, payable on demand.
That’s not the point. The point is where what you have came from in the first place.
A loan creates an advance. That advance is the bank owing a person in return for the person owing the bank.
The advance is then used to pay you so you have a deposit. All that does is change the ownership tag on the advance.
A loan creates an advance. That advance is the bank owing a person in return for the person owing the bank.
The advance is then used to pay you so you have a deposit. All that does is change the ownership tag on the advance.
They must only borrow the money (or get it from somebody else who got it from somebody who borrowed it from the central bank) that they need to pay you out in paper or digital cash and the money they have to keep in reserve. They do not have to borrow the whole credit value. The credit itself is created out of thin air but with some strings attached, so banks can't just create infinite amounts of credit and they cannot just pay out arbitrary sums of created credit. (Source: Some books I read a long time ago.)
> The credit itself is created out of thin air but with some strings attached
Yes - via the central bank, right? I thought that was how quantitative easing worked.
Yes - via the central bank, right? I thought that was how quantitative easing worked.
QE is a separate process from the usual act of money creation by banks making loans, it's best to consider it as an out-of-the-ordinary manual intervention by the central bank where they create new central bank money ad hoc and use that to purchase assets on the market. The normal process of money creation is banks creating new commercial bank money when making loans to individuals and companies.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
>They still have to borrow the money from the central bank. Fractional reserves mean that the credited account's bank must deposit a portion of the money bank at central bank.
Absolutely false. For starters, in many jurisdictions including the US, the reserve fraction is now 0% and has been for quite some time.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
Absolutely false. For starters, in many jurisdictions including the US, the reserve fraction is now 0% and has been for quite some time.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
They don’t. Reserves are irrelevant for bank lending.
They are nothing more than a centralised optimisation of what would otherwise be a full mesh network of point to point exchanges
They are nothing more than a centralised optimisation of what would otherwise be a full mesh network of point to point exchanges
The bank acts as an intermediary, but not the way economists tell you. They say that the bank is an intermediary of loanable funds between debtor and creditor. That is, money exists outside the system and the bank is just efficiently distributing it, kind of like eBay.
Except the bank is an intermediary of a completely different kind between creditor and lender. What the bank does is aggregate illiquid credits and debts to create liquid credit and debt.
You have a coupon that says you are owed X products by person A. Person B has a coupon that says he is owed Y by person C. The bank takes these coupons and transforms these illiquid promises into a liquid promise that lets you buy both X and Y products from person A and C. Think of it as a many to many relationship. The bank essentially acts as a blender that takes many things of non uniform quality and it produces a product of uniform quality.
When you go to the bank and bring a stack of coupon that says "I will work for one hour for you" and the bank puts a stamp on the coupons that says "Bank B vouches for this coupon". Except this is inconvenient. What the bank does instead is print its own coupons that everyone recognizes and it deposits your coupons in its bank vaults. The bank writes down that you owe it all the coupons representing your labor time that you deposited as debt. Except this again is inconvenient, we can do away with the individual coupons entirely. Since paying your own coupon debt requires you to withdraw the coupons using bank coupons, we can just decide that you owe the debt in bank coupons instead.
Except the bank is an intermediary of a completely different kind between creditor and lender. What the bank does is aggregate illiquid credits and debts to create liquid credit and debt.
You have a coupon that says you are owed X products by person A. Person B has a coupon that says he is owed Y by person C. The bank takes these coupons and transforms these illiquid promises into a liquid promise that lets you buy both X and Y products from person A and C. Think of it as a many to many relationship. The bank essentially acts as a blender that takes many things of non uniform quality and it produces a product of uniform quality.
When you go to the bank and bring a stack of coupon that says "I will work for one hour for you" and the bank puts a stamp on the coupons that says "Bank B vouches for this coupon". Except this is inconvenient. What the bank does instead is print its own coupons that everyone recognizes and it deposits your coupons in its bank vaults. The bank writes down that you owe it all the coupons representing your labor time that you deposited as debt. Except this again is inconvenient, we can do away with the individual coupons entirely. Since paying your own coupon debt requires you to withdraw the coupons using bank coupons, we can just decide that you owe the debt in bank coupons instead.
[deleted]
I think you're describing the difference between commercial bank money and central bank money, but I'm not sure.
This is largely correct. Commercial banks are permitted to leverage deposits (Tier 1 capital) by a large ratio.
If a bank lends $10 for every $1 of capital reserves, it will have a capital leverage ratio of 1/10 = 10%.
According to the Basel III standards, this ratio must be at least 3%, though country-wise regulations may vary.
https://www.wallstreetmojo.com/leverage-ratios-for-banks/
But money is also created in other ways. Here is a short article on how money creation, value creation and wealth creation are related:
https://nickrogers.tech/money-creation-wealth-creation-value...
Cheers!
If a bank lends $10 for every $1 of capital reserves, it will have a capital leverage ratio of 1/10 = 10%.
According to the Basel III standards, this ratio must be at least 3%, though country-wise regulations may vary.
https://www.wallstreetmojo.com/leverage-ratios-for-banks/
But money is also created in other ways. Here is a short article on how money creation, value creation and wealth creation are related:
https://nickrogers.tech/money-creation-wealth-creation-value...
Cheers!
Using what for collateral?
Yes banks create money but all they do is discount what already exists.
As every budding entrepreneur finds out when they try to get a loan at 17 years old.
Banks provide liquidity after the fact. They don’t kick the system off.
Yes banks create money but all they do is discount what already exists.
As every budding entrepreneur finds out when they try to get a loan at 17 years old.
Banks provide liquidity after the fact. They don’t kick the system off.
This isn't contradicting the GP's point: money is created by private banks, but they still create “United States dollar” that get a significant part of their value from the US government's ability to enforce taxes.
> That's the source of money, and the source of the price level.
What do you mean?
What do you mean?
"The state sets the terms of exchange for its currency with the prices it pays when it spends, and not per se by the quantity of currency that it spends. For example, if the state has an open-ended offer to hire soldiers at $50,000 per year, the price level as thereby defined will remain constant regardless of how many soldiers are hired and regardless of the state’s total spending. The state has set the value of its numeraire exogenously, providing that information of absolute value that market forces then utilize to allocate by price with exchange values of other goods and services determined in the marketplace. Without the state supplied information, however, there would be no expression of relative value in terms of that currency.
Should the state decide, for example, to increase the price it pays for its soldiers to $55,000 per year, it would be redefining the value of its currency downward and increasing the general price level by 10%, as market forces reflect that increase in the normal course of allocating by price and determining relative value. And for as long as the state continues to pay soldiers $55,000 per year, assuming constant relative values, the price level will remain unchanged. And, for example, the state would have to continually increase the rate of pay by 10% annually to support a continuous annual increase of the price level of 10%."
https://warrenmosler.com/aframeworkfortheanalysisofpriceandi...
Should the state decide, for example, to increase the price it pays for its soldiers to $55,000 per year, it would be redefining the value of its currency downward and increasing the general price level by 10%, as market forces reflect that increase in the normal course of allocating by price and determining relative value. And for as long as the state continues to pay soldiers $55,000 per year, assuming constant relative values, the price level will remain unchanged. And, for example, the state would have to continually increase the rate of pay by 10% annually to support a continuous annual increase of the price level of 10%."
https://warrenmosler.com/aframeworkfortheanalysisofpriceandi...
The game "Captain of Industry" might be a more complete simulation:
https://store.steampowered.com/app/1594320/Captain_of_Indust...
Big thread on it from last year here: https://news.ycombinator.com/item?id=31586833
Big thread on it from last year here: https://news.ycombinator.com/item?id=31586833
In the late 80s, I typed in a BASIC economy simulator I found in some computer magazine. It ran to two or three closely-typed pages (sides).
As Chancellor of the Exchequer, you set the tax-rate, interest rate, level of public spending and so on; then you ran a cycle. I can't remember whether a cycle was a month or a year. After about three years, the workers would be on strike and there would be rioting in the streets. Every time.
I wasn't particularly interested in macroeconomics at the time; I certainly had no idea how to run an economy. I have no idea how realistic the economic model was. I assume it was just a bit of fun.
But I'd like to tinker with a realistic economic model that is flexible enough to, for example, model Modern Monetary Theory.
As Chancellor of the Exchequer, you set the tax-rate, interest rate, level of public spending and so on; then you ran a cycle. I can't remember whether a cycle was a month or a year. After about three years, the workers would be on strike and there would be rioting in the streets. Every time.
I wasn't particularly interested in macroeconomics at the time; I certainly had no idea how to run an economy. I have no idea how realistic the economic model was. I assume it was just a bit of fun.
But I'd like to tinker with a realistic economic model that is flexible enough to, for example, model Modern Monetary Theory.
If you like playing this sort of thing I must recommend NetLogo [0].
It's an "agent" based modelling environment, so you have to "discretize" (yuck) your problem first.
I learned about it because Scott Page uses it for his "Model Thinking" class [1].
[0] https://ccl.northwestern.edu/netlogo/
[1] https://modelthinker.wordpress.com/
There is also the MIT "systems modelling for a complex world"
It's an "agent" based modelling environment, so you have to "discretize" (yuck) your problem first.
I learned about it because Scott Page uses it for his "Model Thinking" class [1].
[0] https://ccl.northwestern.edu/netlogo/
[1] https://modelthinker.wordpress.com/
There is also the MIT "systems modelling for a complex world"
+1 - I studied Netlogo when I dabbled in economic simulation several years back. And alas as a non-software engineer my coding skills were not up to the task for even Netlogo's simplified interface. Yet NL serves as a valuable wrapper for any mesh- or distributed agent programming problem - (for those more skilled than me). One doesn't have to know OOP or anything to get an instructive simulation - (e.g. wolves vs sheep vs grass behavior) up and running. =)
Ah, you see, you have to turn off the IS_FRANCE option.
Top tier comment right here. Well done.
Economist here. Why Modern Monetary Theory in particular? Just curious :)
> Why Modern Monetary Theory in particular?
Because I don't understand it. Having a model to tinker with might help me to understand it better. It looks a bit like voodoo, but then a lot of economics looks like voodoo to me; I'm not an economist.
Because I don't understand it. Having a model to tinker with might help me to understand it better. It looks a bit like voodoo, but then a lot of economics looks like voodoo to me; I'm not an economist.
I've long had the fantasy of an economics simulator given dwarf fortress levels of dedication and attention to detail. This might not be it, but it does warm my soul a bit.
Workers and resources: Soviet Republic is a super fun economic and transportation logistics sim that shines in "Realistic mode". Highly recommended for fans of the genre. Tiny bit like a hardcore version of City Skylines.
Tropico series is simple but fun.
The bulk of it is obvious Capitalism vs Communism political jokes though, so I wouldn't consider it a very serious economic simulator. But its better than most IMO.
The bulk of it is obvious Capitalism vs Communism political jokes though, so I wouldn't consider it a very serious economic simulator. But its better than most IMO.
Eve Online? They even used to employ an economist to monitor the state of the game.
Not really a "simulator" since it's driven by real humans interacting. I'd say it's just a virtual world with its own real economy.
An interesting thing you can do with a simulator is pause, rewind, make arbitrary experiments, run counterfactuals, etc -- all of which are prohibited in Eve since it needs to respect the users who are there to have fun, not be test subjects.
An interesting thing you can do with a simulator is pause, rewind, make arbitrary experiments, run counterfactuals, etc -- all of which are prohibited in Eve since it needs to respect the users who are there to have fun, not be test subjects.
There's Democracy:
https://store.steampowered.com/app/1410710/Democracy_4/
https://store.steampowered.com/app/1410710/Democracy_4/
Thanks, and agreed.
How ironic though, working on that fantasy is near certainly not economically viable. This blog post is merely procrastination that preempted job seeking.
I had hopes for Victoria 3 but it didn't exactly stick the landing
It's not perfect, but they are investing a lot of time on improvements. Paradox games tend to get better over time. 1.5 introduces province-level prices, which make supply chains more interesting.
Same. Dwarf fortress used to have an economy but they took it out. I tried to make something like this and burnt out, though I expect I'll pick it back up again at some point.
I believe that the economy aspect is going to be (eventually) re-worked entirely for a better simulation and to interact better with the existing game. The current development arc is going on several years at this point, so who knows when that might get addressed.
star citizen with its quantum economic simulator is close enough:
https://www.boredgamer.co.uk/2020/04/24/star-citizens-quantu...
Is the source code for this simulator available anywhere? The post's code itself is minimized/obfuscated: https://thomassimon.dev/assets/cashloss.1fca21f6.js
I couldn't find anything on the author's GitHub. I'm mostly just curious how it's built.
I couldn't find anything on the author's GitHub. I'm mostly just curious how it's built.
Author here, if there is enough interest I can clean the code up and put it on GitHub. It is basically a state machine.
I'd love to see it, even in unpolished state.
It'd go well as comparison vs. this code I've been playing around with from Phillip Rosedale (Founder of Second Life) where he's simulating economy for purposes of determining wealth distribution scenarios: https://editor.p5js.org/PhilipRosedale/sketches/odl5elMWy
It'd go well as comparison vs. this code I've been playing around with from Phillip Rosedale (Founder of Second Life) where he's simulating economy for purposes of determining wealth distribution scenarios: https://editor.p5js.org/PhilipRosedale/sketches/odl5elMWy
Yes please! Fantastic work by the way.
I’d love to see the code with a permissive license for others to build upon.
Reminds me a little of ncase’s fantastic simulations — for example: https://ncase.me/sim/
I’d love to see the code with a permissive license for others to build upon.
Reminds me a little of ncase’s fantastic simulations — for example: https://ncase.me/sim/
Would be nice to see a post written about the high-level design and then about the implementation.
I'd love to take a look too. Just a suggestion, push it to github then clean it up. It's always helpful to see not just the product but the process.
Great work.
Just to add to others; I'd be interested to take a look at the source, particularly for animations.
Another +1 from me.
For me I’m particularly interested in how you’ve done the presentation interface.
For me I’m particularly interested in how you’ve done the presentation interface.
I'd appreciate it. :D
State machine? Why not entity component system?
Not the author, but I am trying to replicate it[1] without looking at the code (so sort of blackboxing it)
If you just want the javascript file (195 lines of code), let me know too
I'm currently working on Simulation 15
[1]: https://github.com/ldd/economy-test/tree/master
If you just want the javascript file (195 lines of code), let me know too
I'm currently working on Simulation 15
[1]: https://github.com/ldd/economy-test/tree/master
Author again,
https://github.com/Ruddle/EconomySimulator
dont' mistake a beautiful map for the territory, you'll find yourself lost amongst lines that aren't a real place.
On Exactitude in Science
By Jorge Luis Borges
…In that Empire, the Art of Cartography attained such Perfection that the map of a single Province occupied the entirety of a City, and the map of the Empire, the entirety of a Province. In time, those Unconscionable Maps no longer satisfied, and the Cartographers Guilds struck a Map of the Empire whose size was that of the Empire, and which coincided point for point with it. The following Generations, who were not so fond of the Study of Cartography as their Forebears had been, saw that that vast Map was Useless, and not without some Pitilessness was it, that they delivered it up to the Inclemencies of Sun and Winters. In the Deserts of the West, still today, there are Tattered Ruins of that Map, inhabited by Animals and Beggars; in all the Land there is no other Relic of the Disciplines of Geography.
source: https://kwarc.info/teaching/TDM/Borges.pdf
…In that Empire, the Art of Cartography attained such Perfection that the map of a single Province occupied the entirety of a City, and the map of the Empire, the entirety of a Province. In time, those Unconscionable Maps no longer satisfied, and the Cartographers Guilds struck a Map of the Empire whose size was that of the Empire, and which coincided point for point with it. The following Generations, who were not so fond of the Study of Cartography as their Forebears had been, saw that that vast Map was Useless, and not without some Pitilessness was it, that they delivered it up to the Inclemencies of Sun and Winters. In the Deserts of the West, still today, there are Tattered Ruins of that Map, inhabited by Animals and Beggars; in all the Land there is no other Relic of the Disciplines of Geography.
source: https://kwarc.info/teaching/TDM/Borges.pdf
nice, you beat me to this gem (with a side of Lewis Carroll and Baudrillard) because I was finishing work
the lesson is, never try
edit OH and the other part is that it was staged literary forgery by "Suarez Miranda, Viajes de varones prudentes, Libro IV, Cap. XLV, Lerida, 1658." Borges overclocked the meta
the lesson is, never try
edit OH and the other part is that it was staged literary forgery by "Suarez Miranda, Viajes de varones prudentes, Libro IV, Cap. XLV, Lerida, 1658." Borges overclocked the meta
I was thinking about this the other day and it seems like the problem of map size is also the problem of the story of our lives. How much detail is really necessary.
But a massive precise map is the perfect seed for a useful simplified map.
Simplifying from a non-complex source is a waste of time.
Simplifying from a non-complex source is a waste of time.
It sounds like you take issue with this simulation? It applies heavily academic and simplistic rules around behavior. I like build up of it all to illustrate _simulating things_, but I think almost any traditional economics theory outside behavioral economics ought to be shelved for good.
I'd go the other way, behavioral economics ought to be shelved for good. Classic econ should come back, but with a stamp on its forehead that is is not science or a practice.
https://www.thebehavioralscientist.com/articles/the-death-of...
https://www.thebehavioralscientist.com/articles/the-death-of...
So what, we have no ground truth about economics? Is it just a close cousin of psychology?
Economics sits at that intersection between the social sciences and the exact sciences: you can get some useful quantitative predictions out of it, but that is discounted by the fact that people are messy, and become even messier where money is concerned.
Economy is not that different from psychology, physics, or indeed any natural science. All try to predict how they would change depending on various factors and invent explanatory models that are never perfectly correct.
It’s just that some have had more apparent prediction success than others (non-coincidentally, it’s those that don’t directly involve humans as subjects), while some are liable to affect people’s lives in more direct and drastic ways (non-coincidentally, it’s those that do directly involve humans as subjects).
It’s just that some have had more apparent prediction success than others (non-coincidentally, it’s those that don’t directly involve humans as subjects), while some are liable to affect people’s lives in more direct and drastic ways (non-coincidentally, it’s those that do directly involve humans as subjects).
Economics is bulk effect Psychology.
I would agree up until recently. I am starting to think, though, that behavioral is only relevant in an economy of choice. With choice I keep it simple to having the option to spend or not wealth (including consuming/selling some of your stock). The less choice in the market, the more the classical models will be reasonable and efficient approximations as they can accommodate one sided choices. Complex dynamics are not what we experience now. There is a market direction, the power to impose it and its application at clear sight.
Both have been shelved; the state of the art in economic modeling is far, far more sophisticated. It goes way beyond the limitations of economics’ loan from XIX century physics (static mechanics).
Economic modeling based on game theory with extensions (say, requiring that certain agent choices are computable and are so under a limited computational budget, or non determinism, or learning) you still get sensible results under much weaker hypothesis.
Economic modeling based on game theory with extensions (say, requiring that certain agent choices are computable and are so under a limited computational budget, or non determinism, or learning) you still get sensible results under much weaker hypothesis.
[deleted]
May I present HAMURABI:
https://www.atariarchives.org/basicgames/showpage.php?page=7...
I had a lot of fun playing and modifying that game. Learned a lot about programming with it.
https://www.atariarchives.org/basicgames/showpage.php?page=7...
I had a lot of fun playing and modifying that game. Learned a lot about programming with it.
Was not expecting to see an Atari game produced in my home town today
First, I really appreciate author trying to understand economy better in this way, even though this simulation is quite naive. I think everybody should do that.
But as others have noted, it has no concept of capital, private property, and labor market. Therefore, it's not capitalism. It's not anarchism or communism either - it lacks flexibility of workers to do something else, or state planning telling workers to do something else. At best, it could be a model of a feudal society (where the "state servants" are the landed nobility).
Furthermore, it has no concept of natural resources, energy, labor and goods. That has to be there before we even get to things like money.
Also, the money definition is problematic. Money is essentially a contract, and can be created even between three private parties as resoldable bonds. This isn't there.
I would also suggest, if the author (or anybody else) is interested, look at Steve Keen's work in economic simulation and his Minsky program. This guy is far ahead of everybody else in actually trying to understand how real economies work.
To people who wonder why don't we have good economy simulators that would reflect a real world. Well, I think the answer is pretty simple - rich people don't want that. They don't want plebes to understand what it means to be rich, most rich people know they wealth is undeserved, and don't want other people to see it flaunted openly. So they prefer hegemony (in Gramsci terms) of neoliberal economics, which is misleading about what is happening in reality.
But as others have noted, it has no concept of capital, private property, and labor market. Therefore, it's not capitalism. It's not anarchism or communism either - it lacks flexibility of workers to do something else, or state planning telling workers to do something else. At best, it could be a model of a feudal society (where the "state servants" are the landed nobility).
Furthermore, it has no concept of natural resources, energy, labor and goods. That has to be there before we even get to things like money.
Also, the money definition is problematic. Money is essentially a contract, and can be created even between three private parties as resoldable bonds. This isn't there.
I would also suggest, if the author (or anybody else) is interested, look at Steve Keen's work in economic simulation and his Minsky program. This guy is far ahead of everybody else in actually trying to understand how real economies work.
To people who wonder why don't we have good economy simulators that would reflect a real world. Well, I think the answer is pretty simple - rich people don't want that. They don't want plebes to understand what it means to be rich, most rich people know they wealth is undeserved, and don't want other people to see it flaunted openly. So they prefer hegemony (in Gramsci terms) of neoliberal economics, which is misleading about what is happening in reality.
> rich people don't want that
You had a great comment until you went off the rails. Sadly, economic ignorance is much more easily explained by apathy and the rarity of systems level thought in the general population.
You had a great comment until you went off the rails. Sadly, economic ignorance is much more easily explained by apathy and the rarity of systems level thought in the general population.
That wouldn't be a problem, just look at climate science, it has decent models of very complicated systems, grounded in real-world understanding. But it requires lot of data to be collected and made available for people who do these simulations.
Would rich people be able to stop you from creating a good economy simulator? At the end of the day, it's programming. Someone who has studied economics could make that without rich people coming after him. I argue that no one would come after you if you were to do so.
Yeah, but you also need to compare it with real world data. Without grounding, the simulation will be very limited.
So you need to understand the real-world monetary flows to a sufficient level of detail. You need to understand who actually owns what, and how the power is exerted. And the rich people are against that, for example, in most developed countries (with IIRC notable exception of Norway and Sweden) the tax fillings are private.
Also, it's kind of difficult to understand actual production, because private companies keep the data on production costs secret.
On top of that, there is little culture of data sharing in economics profession. Again, mostly because the data are very valuable to companies and individuals, profit takes precedence to public understanding.
So the fact of the matter is, lot of powerful people (and perhaps most middle class as well) don't want the level of transparency required to build a meaningful model.
It's true that nobody will come after you if you try to program it. But also, you won't get much support from the existing, mostly neoliberal, institutions.
So you need to understand the real-world monetary flows to a sufficient level of detail. You need to understand who actually owns what, and how the power is exerted. And the rich people are against that, for example, in most developed countries (with IIRC notable exception of Norway and Sweden) the tax fillings are private.
Also, it's kind of difficult to understand actual production, because private companies keep the data on production costs secret.
On top of that, there is little culture of data sharing in economics profession. Again, mostly because the data are very valuable to companies and individuals, profit takes precedence to public understanding.
So the fact of the matter is, lot of powerful people (and perhaps most middle class as well) don't want the level of transparency required to build a meaningful model.
It's true that nobody will come after you if you try to program it. But also, you won't get much support from the existing, mostly neoliberal, institutions.
Yes because a rich person demands I pay them money for housing, which among other things I need to survive, and my precious programming time is spent under a different rich person to get that money.
> To people who wonder why don't we have good economy simulators that would reflect a real world. Well, I think the answer is pretty simple - rich people don't want that.
The comment above is an example of an explanatory theory [1]
> An explanatory analysis will try not only to describe the information but also to provide causal relationships between the various data presented.
Simple, yes, but also too simplistic. It isn't very persuasive. For the theory to be useful, then "rich people not wanting that" would have to be causally relevant. The comment above only provides an implied incentive (e.g. rich people would benefit by preventing knowledge dissemination that undermines their status). However, there is no convincing argumentation showing how such incentives play out, much less that they are significant enough to be causally important.
I don't want to reject the entirety of what the commentor above might be trying to say. There are probably aspects that are interesting, surprising, or maybe even troubling. Perhaps there have been documented cases of influential elites shaping economic theories and how they get communicated. Maybe; I haven't studied the history of bias in the field of economics per se. I know of many biases, but so far I've tended to think about them as being largely intellectual oversimplifications rather than designed misdirections.
Let's look to some other 'simple' explanations. One competing theory would be that economists and modelers want to earn status and earn a living. There doesn't have to be any malicious nor coordinated action to explain such behavior. There are many levels of systemic behavior that align with powerful interests without any causal chain. This is sometimes referred to as co-evolution or co-adaptation.
I do want to reject the whole family of (not so good) explanatory theories that fail to give sufficient argumentation for causality.
[1] https://philosophy.stackexchange.com/questions/30827/what-is...
The comment above is an example of an explanatory theory [1]
> An explanatory analysis will try not only to describe the information but also to provide causal relationships between the various data presented.
Simple, yes, but also too simplistic. It isn't very persuasive. For the theory to be useful, then "rich people not wanting that" would have to be causally relevant. The comment above only provides an implied incentive (e.g. rich people would benefit by preventing knowledge dissemination that undermines their status). However, there is no convincing argumentation showing how such incentives play out, much less that they are significant enough to be causally important.
I don't want to reject the entirety of what the commentor above might be trying to say. There are probably aspects that are interesting, surprising, or maybe even troubling. Perhaps there have been documented cases of influential elites shaping economic theories and how they get communicated. Maybe; I haven't studied the history of bias in the field of economics per se. I know of many biases, but so far I've tended to think about them as being largely intellectual oversimplifications rather than designed misdirections.
Let's look to some other 'simple' explanations. One competing theory would be that economists and modelers want to earn status and earn a living. There doesn't have to be any malicious nor coordinated action to explain such behavior. There are many levels of systemic behavior that align with powerful interests without any causal chain. This is sometimes referred to as co-evolution or co-adaptation.
I do want to reject the whole family of (not so good) explanatory theories that fail to give sufficient argumentation for causality.
[1] https://philosophy.stackexchange.com/questions/30827/what-is...
I thought about your comment quite a lot. I don't think whether something is conscious act or not has nothing to do with causality. Steve Keen actually did some simulations according to which oligopolies can form without firms even knowing each other, just through a common pricing mechanism. That doesn't mean that oligopolies are not causally responsible for lower economic performance.
You already seem to accept that there is evidence that powerful people do not want economic transparency. This is my (anecdotal) observation as well, some of it directly from economists.
As far as economics as a profession, it's odd that (neo)classical economics held for a century despite many criticisms against it over the years (in particular the criticism that it is never really positivist). It seems pretty inline with the idea that powerful people are willing to pour a lot of money to maintain its hegemony.
Whether the economists realize it.. Steve Keen discusses this a lot. Lot of neoclassical economists did some research themselves that disputed basic neoclassical assumptions, only for these assumptions to be continued to be taught to the next generation. So lot of them are probably pretty honest, just misguided.
You already seem to accept that there is evidence that powerful people do not want economic transparency. This is my (anecdotal) observation as well, some of it directly from economists.
As far as economics as a profession, it's odd that (neo)classical economics held for a century despite many criticisms against it over the years (in particular the criticism that it is never really positivist). It seems pretty inline with the idea that powerful people are willing to pour a lot of money to maintain its hegemony.
Whether the economists realize it.. Steve Keen discusses this a lot. Lot of neoclassical economists did some research themselves that disputed basic neoclassical assumptions, only for these assumptions to be continued to be taught to the next generation. So lot of them are probably pretty honest, just misguided.
> rich people don't want that
Where does this sentiment come from? And what do you define as rich? I have been acquainted with rich people for decades now and many of them seem pretty darn open to me.
Where does this sentiment come from? And what do you define as rich? I have been acquainted with rich people for decades now and many of them seem pretty darn open to me.
So if you feel that way, why not program your own model introducing the "concept of capital, private property, and labor market"?
> why not program your own model
I wouldn't use the word 'program' here; I think it misses the essence of quantitative modeling. Quantitative models can be defined on purely mathematical terms. Some of these also benefit tremendously from computer simulation. Still, many can be analyzed and understood based on mathematical properties.
The worlds of declarative programming and formal analysis can come together in very interesting ways w.r.t. modeling and simulation.
P.S. This comment isn't aimed particularly at the commenter above; I'm writing this comment because I don't think the domain of 'modeling and simulation' is generally well-understood among software developers nor HN participants.
I wouldn't use the word 'program' here; I think it misses the essence of quantitative modeling. Quantitative models can be defined on purely mathematical terms. Some of these also benefit tremendously from computer simulation. Still, many can be analyzed and understood based on mathematical properties.
The worlds of declarative programming and formal analysis can come together in very interesting ways w.r.t. modeling and simulation.
P.S. This comment isn't aimed particularly at the commenter above; I'm writing this comment because I don't think the domain of 'modeling and simulation' is generally well-understood among software developers nor HN participants.
Honestly, I'd love to, it's on my list. I really like what Steve Keen is doing. But I am currently amusing myself with a math problem, and that's more important.
That's one of the most entertaining posts I've seen in a while. Would very much like to see a part 2. Also, as an aside, wow are those some tasteful gradients on the recent post links.
Beware optimizing for "average" quality of life, we did that and it worked. Turns out it is more efficient to have a super-minority with a very high QoL. Median is a better target.
Am I the only one to find the simulation deviate from the description starting from Simulation 8?
For example, I see a farmer with 7 food, 7 water and 7 wood, buying water. According to the description, their QoL would be 7 both before and after the transaction, so they are not supposed to buy because there wouldn't be an increase of their QoL:
> People are potential buyers of the resources that increase their quality of life
Additionally the average QoL indicator seems wrong. This is what I see at step 72:
For example, I see a farmer with 7 food, 7 water and 7 wood, buying water. According to the description, their QoL would be 7 both before and after the transaction, so they are not supposed to buy because there wouldn't be an increase of their QoL:
> People are potential buyers of the resources that increase their quality of life
Additionally the average QoL indicator seems wrong. This is what I see at step 72:
Farmer 1: 50$ 6 6 5 => QoL 5
Farmer 2: 90$ 4 4 5 => 4
Farmer 3: 10$ 7 7 7 => 7
Avg QoL 3.0
Author here,
In case all resources are equally owned, the QoL is bound to all of them (as opposed to none). It does take multiple purchases to increase the QoL, but it is the only way. Otherwise people would starve due to aboulomania.
The average QoL is sampled each end of day, step 73-75 depending on the random seed. At step 72 you are seeing the zeroth day average QoL ,with nearly all the intraday mutations of the first day.
The average QoL is sampled each end of day, step 73-75 depending on the random seed. At step 72 you are seeing the zeroth day average QoL ,with nearly all the intraday mutations of the first day.
Thanks for the explanation. It makes perfectly sense.
This website is really cool (not just the post). Thomas must have put a decent amount of work. How to find the secrets?
Great set of simulations!
Can someone explain why in Simulation 16, 4 producing workers can support 3 non-producing workers consuming just as much as them with just 10% taxation and yet they have similar QOL? It doesn't make sense to me intuitively.
If we ignore money and just look at goods this implies 3 people can do "nothing" (the government workers don't buy from anyone in this simulation) and yet consume as much as 4 people who do produce, and the 4 taxed people only have to pay 10% taxes while everyone enjoys similar quality of life as 60% taxation.
It would be like imagine you have four cartons of ten eggs and you tax 10% of each one. How can you end up with 3 whole cartons just from that taxes, it would only be four eggs, less than half of one carton rather than three extra cartons of the same size as the new reduced carton size of 9.
Can someone explain why in Simulation 16, 4 producing workers can support 3 non-producing workers consuming just as much as them with just 10% taxation and yet they have similar QOL? It doesn't make sense to me intuitively.
If we ignore money and just look at goods this implies 3 people can do "nothing" (the government workers don't buy from anyone in this simulation) and yet consume as much as 4 people who do produce, and the 4 taxed people only have to pay 10% taxes while everyone enjoys similar quality of life as 60% taxation.
It would be like imagine you have four cartons of ten eggs and you tax 10% of each one. How can you end up with 3 whole cartons just from that taxes, it would only be four eggs, less than half of one carton rather than three extra cartons of the same size as the new reduced carton size of 9.
Author here, simulation 16 shows that money printing, and tax have common effects. The state can replace one with another. Here the 65% tax is replaced with 10% tax plus inflation, i.e., giving new money to public servants. The new money creation decreases the value of money owned by producing workers.
We could even remove the tax entirely, and still support the 3 public servants. To be convinced you can look at each unit transaction and see that all resource are accounted for.
Another way to look at it, is that the QoL of producing workers is lower than if there was no public servants. Every resource a public servant has, is bought from a worker at some point, whether the money for the purchase comes from taxation or inflation.
We could even remove the tax entirely, and still support the 3 public servants. To be convinced you can look at each unit transaction and see that all resource are accounted for.
Another way to look at it, is that the QoL of producing workers is lower than if there was no public servants. Every resource a public servant has, is bought from a worker at some point, whether the money for the purchase comes from taxation or inflation.
Interesting, thank you so much!
I didn’t realize that inflation (where money is created and given to government to spend) is exactly the same as taxation.
I didn’t realize that inflation (where money is created and given to government to spend) is exactly the same as taxation.
Great start! Some things to consider for future versions: more sophisticated tax code, financial regulations, monopsonies, monopolies, collusion, corruption, oligarchies, demand elasticity, cascading effects from supply chain disruptions, central bank quantitative easing.
A lot of this is Macroeconomics- Microeconomics (what this focused on) is effectively a different discipline. You can't really model both of them within the same framework
Source: econ major
Source: econ major
Undergrad Econ courses still present micro and macro economics as two disciplines, but that’s theory from the 70s at best.
Graduate level economics packs a lot of economic models where for example the interest rate depends on the intertemporal preferences of different types of agents.
It just gets terribly complicated.
Graduate level economics packs a lot of economic models where for example the interest rate depends on the intertemporal preferences of different types of agents.
It just gets terribly complicated.
All of this is emergent behaviour. Agents need to be smarter and the networks need to be larger and information needs to have a cost.
One really cool thing to do is consider the agents to have limited computational capacity. There are a few NP economic problems, and you can’t expect agents to really be solving enormous computational problems in their heads.
The simulation only has workers/producers and it has a free market – it is missing capitalism. To make it realistic you need a subset of people owning the labor output of others, taking out all the surplus, using it to buy stakes of more economic activity, diverting profits to themselves, thus creating the loop of concentration of wealth which removes the surplus wealth from the producers and assigns it to ever decreasing number of ever wealthier individuals.
The "good" news is that gravity hates the Tower of Babel that every society inevitably produces.
No. Gravity and a flat surface doesn't exist in money-power.
It is buoyancy. It lifts few people up very high as they push down more that go down under the waves.
It is buoyancy. It lifts few people up very high as they push down more that go down under the waves.
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The "bad" news is that this kind of gravity tends to get called things like "The Reign of Terror".
No, no: the jackwagons atop the Tower engage in the reign of terror.
The gravity at work here is economics, as seen through the lens of people. People, it turns out, don't flourish in captivity.
The gravity at work here is economics, as seen through the lens of people. People, it turns out, don't flourish in captivity.
If you actually want to simulate an economy, the answer is complex dynamic systems. Traditional static equilibrium models (like Computational General Equilibrium (CGE) or the not actually very dynamic Dynamic Stochastic General Equlibrium (DSGE) models) are pretty useless (they have all these 'nudging' variables to try and push things towards reality but the actual underlying methodology is bunk).
Even weather forecasting moved to dynamical systems models decades ago, economics still hasn't caught up.
Even weather forecasting moved to dynamical systems models decades ago, economics still hasn't caught up.
This adds money in before it adds the state, or taxation. Money is created through taxation by the state to provision resources away from the private sector to the public purpose.
https://www.nobelprize.org/prizes/economic-sciences/1973/leo...
His ideas might finally become practical to implement.
Then again, von Neumann thought weather prediction would be solved in short order after the invention of the computer.
Simulation 16 is hilarious. By the state dynamically scaling how much they print money in order to support government workers, government workers accumulate more wealth than the producers of goods.
Those that actually produce goods are very far down the wealth pecking order
And the social pecking order, it would seem.
Sounds like state workers in California
See LA lifeguards making $300k/yr
https://lamag.com/news/the-highest-paid-lifeguard-in-l-a-mak...
How does this happen?
Every single government employee and their family/friends vote in local elections, and other people do not. You will not win an election without their votes, and you can use opaque compensation like DB pensions and whatnot to hide and punt forward the costs of the compensation.
You will never find a non taxpayer funded entity promise something like this:
>After 30 years of service, LA lifeguards can retire as young as 55 on 79-percent of their pay.
Go ask an insurance company how much an annuity for even $80k would cost starting at age 55 until death. It would be $1M+.
Social Security averages out your earnings for your whole lifetime to calculate the benefit, and that is with the power of the federal government. City and state governments regularly promise employees final average 1, 3, 5, and at best 10 pay formulas. So you see cops/firefighters/lifeguards/etc spiking their overtime and working 80 hours per week for the last few years, doubling and tripling their DB pension benefit.
And you simply will not see this outside of taxpayer funded entities.
You will never find a non taxpayer funded entity promise something like this:
>After 30 years of service, LA lifeguards can retire as young as 55 on 79-percent of their pay.
Go ask an insurance company how much an annuity for even $80k would cost starting at age 55 until death. It would be $1M+.
Social Security averages out your earnings for your whole lifetime to calculate the benefit, and that is with the power of the federal government. City and state governments regularly promise employees final average 1, 3, 5, and at best 10 pay formulas. So you see cops/firefighters/lifeguards/etc spiking their overtime and working 80 hours per week for the last few years, doubling and tripling their DB pension benefit.
And you simply will not see this outside of taxpayer funded entities.
Another part of the challenge is overtime -- it ends up costing a lot to pay out time-and-a-half on an already fat paycheck. I think we should figure out some binding pre-commitment to forbid or at least minimize regular overtime. Something like "if > 50% of one employee's worth of overtime is required a new role must be opened instead of paying overtime".
I understand that unions like OT for their members (of course they would!) but as an employer it's insane to be handing it out as regularly as government employees get it.
I understand that unions like OT for their members (of course they would!) but as an employer it's insane to be handing it out as regularly as government employees get it.
so you mean the solution to that would be mandatory voting?
No, I think it is still too complicated of an issue to burden voters with understanding. The better solution would be restricting all employer employee compensation arrangements to cash only.
That would solve politicians being able to pay with unaccounted for benefits that become a burden decades later, and increase labor price transparency and result in better functioning markets once employers are out of the health/vision/dental/public transport/retirement benefit business.
And a third bird it kills is reducing the advantage big businesses have over small businesses.
That would solve politicians being able to pay with unaccounted for benefits that become a burden decades later, and increase labor price transparency and result in better functioning markets once employers are out of the health/vision/dental/public transport/retirement benefit business.
And a third bird it kills is reducing the advantage big businesses have over small businesses.
These waterfront lifeguards have a lot more in common with EMTs and firefighters than have with the teenager who watches septagenarians do laps at your local pool, and they're compensated as such.
No CEO or programmer dies in the line of duty, yet you can't throw a rock on this site without hitting thkse kinds of compensation.
No CEO or programmer dies in the line of duty, yet you can't throw a rock on this site without hitting thkse kinds of compensation.
Exactly, the average techbro's output working at a FAANG company likely ruins more lives than the average lifeguard saves. The compensation is clearly just.
More like bankers everywhere.
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I'm a few days late but I just remembered about a tool called Machinations that can be used to design/simulate game economies: https://machinations.io
I did something similar, but started somewhere different: The individuals personal value of a good. You might find it interesting as a different approach to a similar project. https://jasonfantl.com/posts/Simulated-Economy-(1)/
Great series! I liked your addition of inter-process communication, and the last one was a treat.
The dynamic price simulation reminds me of Primer ( https://www.youtube.com/@PrimerBlobs/videos ), specifically: https://www.youtube.com/watch?v=PNtKXWNKGN8
I'm currently in my second year of my Bach degree for Information Technology and I have had this exact same idea but never really knew how to go about it. But I think I might attempt it next year during my A.I. and Data Science paper. Just as proof of concept for neural network practice and learning.
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Beautifully made and illustrative of a currently non-existing branch of economic education, if not economic theory itself.
While people get to be force-fed all sorts of complex subjects at school, economics does not feature prominently.
The result of this widespread economic illiteracy is easily seen at the quality of political discourse.
While people get to be force-fed all sorts of complex subjects at school, economics does not feature prominently.
The result of this widespread economic illiteracy is easily seen at the quality of political discourse.
I’d love to work on this more. Definitely would like to see it on GitHub.
If we’re talking about money printing then we need to talk about money shredding as well.
If government prints money to buy thing then taxation feeds old money into the shredder.
Print is always matched with a shred.
Even bank loans are paid off (shredded)
If we’re talking about money printing then we need to talk about money shredding as well.
If government prints money to buy thing then taxation feeds old money into the shredder.
Print is always matched with a shred.
Even bank loans are paid off (shredded)
This is fun, but it is as much of an “economy simulator” as Factorio is “logistics simulator”. It's not just that it is a simplification, it's just completely made up stuff that just looks like “popular understanding of economics”.
I think it’d be very cool if you build a “controls” page where people can configure different variables such as inflation, taxes or market supply of something and you could share your version of simulated economy
Prof Steve Keen has developed a free tool called Minsky for economic modeling as well as many models: https://www.youtube.com/@ProfSteveKeen
In this day and age of AI, I think it's worth trying to build a better economy simulator without having any existing economic models in mind. Addressing this from a programming point of view could lead to interesting results.
That's more or less what every quantitative hedge fund out there is doing.
With no reports of funds consistently beating the market in a surprising way.
There’s no consistent way to make money. You can exploit small details about how each market works, but in a short time everyone will notice and copy you. It’s like a market without patents. People talk, the trade ideas spread. Like wildfire. Too fast even for a quant to make sense - good managers can tell if a piece of info is hot. No manager will ever be able to tell whether a stock will outperform.
There’s no consistent way to make money. You can exploit small details about how each market works, but in a short time everyone will notice and copy you. It’s like a market without patents. People talk, the trade ideas spread. Like wildfire. Too fast even for a quant to make sense - good managers can tell if a piece of info is hot. No manager will ever be able to tell whether a stock will outperform.
It's a common misconception about hedge funds that objective is to outperform market.
The objective is to maximize profit per unit of risk taken. If hedge fund made 20% less than market but took 50% less risk, that's a MASSIVE value proposition.
(now, one could argue they fail at that too, but that's more difficult to prove)
The objective is to maximize profit per unit of risk taken. If hedge fund made 20% less than market but took 50% less risk, that's a MASSIVE value proposition.
(now, one could argue they fail at that too, but that's more difficult to prove)
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Wow, you have to be the super expert that unveiled the whole hedge fund scam. Thanks for your enlightening opinion.
That has been done uncountable times…
It’s just really hard to get precise predictions. Really hard. Not like settling P=NO hard, but like moto perpetuo hard.
It’s just really hard to get precise predictions. Really hard. Not like settling P=NO hard, but like moto perpetuo hard.
I did not expect to read through and run every simulation. But I did.
The symmetry is nice. I did not expect to write, or code most of it. We were both taken by serendipity.
One way to make this realistic is to add game theory to the simulation. Otherwise, the most important assumption in economics will be left out: rationality in decision making.
I don't think the objective is realism here, but rather education.
Also, I'm not convinced "rationality" is key in reaching realism.
Also, I'm not convinced "rationality" is key in reaching realism.
To simulate economy, you need to simulate individuals with their wants and needs and relationships and the environment, as simple (complex) as that.
This is interesting, in that I've tried to come up with simple simulations like this for strategy games before. But I was a little "eww" when he kicked the number of government workers up to 40% of the workforce. Looks like it goes all the way up to 50%.
On simulation #13, where tax is fixed at 10%, the government workers all eventually starve. Surprisingly, the libertarians are correct because at this point the quality of life index abruptly rockets up to twice what it used to be. But there's some sort of robotic overlord AI going on, it still collects the tax.
But then in simulation #18, things become a little insane. I call this one the Massachusetts simulation... only 3 workers, but 9 government employees. For a 3:1 ratio. The simulation suggests that some sort of economic meltdown occurs and they all starve, but I suspect that things were a little more violent than that.
After, the developer then introduces ration tickets. This is simulation #20, and I'm pretty sure it's Zimbabwe. But it's not the real world Zimbabwe, it somehow works. That is, if you're ok printing trillion dollar bills.
Simulation #21 takes a new direction entirely. FDR has been elected, and tries to stamp out competition... but he is too late, evil capitalist farmers have grown too many apples, which perversely leads to starvation. Careful apple quotas are needed. The government has disappeared though, probably because late stage capitalism destroyed it. Only the corporations survive.
Surprisingly, no farm subsidies yet. I predict the introduction of a new private sector worker, the ConAgra lobbyist. We'll see if he shows up in a later simulation. That is, assuming another government is elected.
In simulation #25, one of the warlords has settled down and become a government again. But this is the last of the simulations. No lobbyists, though the central bank has returned. This might be because Andrew Jackson has died. I did not like the man, he will not be missed. But quite clearly the inflation is through the roof again, and 30% taxes are here to stay.
What I've learned from these is that history is a lie. Rhodesia probably never existed, and Zimbabwe happened before the US civil war.
On simulation #13, where tax is fixed at 10%, the government workers all eventually starve. Surprisingly, the libertarians are correct because at this point the quality of life index abruptly rockets up to twice what it used to be. But there's some sort of robotic overlord AI going on, it still collects the tax.
But then in simulation #18, things become a little insane. I call this one the Massachusetts simulation... only 3 workers, but 9 government employees. For a 3:1 ratio. The simulation suggests that some sort of economic meltdown occurs and they all starve, but I suspect that things were a little more violent than that.
After, the developer then introduces ration tickets. This is simulation #20, and I'm pretty sure it's Zimbabwe. But it's not the real world Zimbabwe, it somehow works. That is, if you're ok printing trillion dollar bills.
Simulation #21 takes a new direction entirely. FDR has been elected, and tries to stamp out competition... but he is too late, evil capitalist farmers have grown too many apples, which perversely leads to starvation. Careful apple quotas are needed. The government has disappeared though, probably because late stage capitalism destroyed it. Only the corporations survive.
Surprisingly, no farm subsidies yet. I predict the introduction of a new private sector worker, the ConAgra lobbyist. We'll see if he shows up in a later simulation. That is, assuming another government is elected.
In simulation #25, one of the warlords has settled down and become a government again. But this is the last of the simulations. No lobbyists, though the central bank has returned. This might be because Andrew Jackson has died. I did not like the man, he will not be missed. But quite clearly the inflation is through the roof again, and 30% taxes are here to stay.
What I've learned from these is that history is a lie. Rhodesia probably never existed, and Zimbabwe happened before the US civil war.
> at this point the quality of life index abruptly rockets up
That's because on this simulation the government isn't doing any useful work.
The ration tickets work because the people were programed to actually follow the law. It fails every time on the real world because real people aren't.
And the simulation #20 works because the simplistic model actually works. At a first approximation, inflation isn't a problem at all. Things only start to fail after you have competition, corruption, very limited resources, etc.
Simulation #21 is a great visualization of why people must be able to set prices with enough freedom, and why forced price-fixing bankrupts countries.
That's because on this simulation the government isn't doing any useful work.
The ration tickets work because the people were programed to actually follow the law. It fails every time on the real world because real people aren't.
And the simulation #20 works because the simplistic model actually works. At a first approximation, inflation isn't a problem at all. Things only start to fail after you have competition, corruption, very limited resources, etc.
Simulation #21 is a great visualization of why people must be able to set prices with enough freedom, and why forced price-fixing bankrupts countries.
The "useful work" was implied. That is, the assumption was the government was perfectly valuable to society with relation to the cost it incurred. It might've been interesting to see the government throw money at the farmers every year or so, though.
I think it'd be interesting to a more in-game useful work of the government. For example that the homes of the producer may catch fire randomly. If there is at least a firefighter there is no problem, but once all firefighter die, then there is a 1% chance per day that each producer may burn and die.
At the beginning of #13 eve thing is fine, until all firefighter die and the quality of life index abruptly rockets for a while. Then for example the apple producer dies, and after a few days everyone starves and dies.
It may be a more complicated criteria, like each firefighter can protect only 2 or 3 producers, so the ratio of producers to government workers must be always not too high.
At the beginning of #13 eve thing is fine, until all firefighter die and the quality of life index abruptly rockets for a while. Then for example the apple producer dies, and after a few days everyone starves and dies.
It may be a more complicated criteria, like each firefighter can protect only 2 or 3 producers, so the ratio of producers to government workers must be always not too high.
> the people were programed to actually follow the law. It fails every time on the real world because real people aren't.
Is anyone working on the problem of programming people? Or are we just hoping for a solution to that to fall into our laps?
> and why forced price-fixing bankrupts countries.
Ah ha! On this one I paid very close attention. No secret libertarians hiding in woodpiles, and sneaking out at night (or any other time) and stealing from the people. The only rational conclusion is that the simulation was set up to fail as some sort of propaganda.
Besides, only a few people died anyway, which for any socialist country is miraculously impressive success. So maybe not propaganda.
I'm beginning to think these simulations don't offer any insight into the real world at all.
Is anyone working on the problem of programming people? Or are we just hoping for a solution to that to fall into our laps?
> and why forced price-fixing bankrupts countries.
Ah ha! On this one I paid very close attention. No secret libertarians hiding in woodpiles, and sneaking out at night (or any other time) and stealing from the people. The only rational conclusion is that the simulation was set up to fail as some sort of propaganda.
Besides, only a few people died anyway, which for any socialist country is miraculously impressive success. So maybe not propaganda.
I'm beginning to think these simulations don't offer any insight into the real world at all.
> Is anyone working on the problem of programming people?
We gave The New Soviet Man[1] a try for a couple of decades, but it didn't really stick.
As the late-20th, early 21st century has shown, programming that seeks to amplify our vices[2], as opposed to turn us against them turned out to be far more effective.
[1] https://en.wikipedia.org/wiki/New_Soviet_man
[2] Don't think, just buy.
We gave The New Soviet Man[1] a try for a couple of decades, but it didn't really stick.
As the late-20th, early 21st century has shown, programming that seeks to amplify our vices[2], as opposed to turn us against them turned out to be far more effective.
[1] https://en.wikipedia.org/wiki/New_Soviet_man
[2] Don't think, just buy.
> After, the developer then introduces ration tickets. This is simulation #20, and I'm pretty sure it's Zimbabwe. But it's not the real world Zimbabwe, it somehow works. That is, if you're ok printing trillion dollar bills.
In a cashless society, I suspect the zimbabwe method would actually probably work. The only hangup was "Now I need to crate around boatloads of money". In a cashless society, we can just move the decimal point every so often.
In a cashless society, I suspect the zimbabwe method would actually probably work. The only hangup was "Now I need to crate around boatloads of money". In a cashless society, we can just move the decimal point every so often.
It's definitely important, when analyzing the impact of policies on an economy, not to get hung up on things like 'what the numbers on the banknotes look like' rather than important things like 'how well the population's wants and needs are satisfied'. Certainly it's not inherently a problem to continually have to revalue your currency if the net effect of your economy is it makes a lot of happy people, and it's certainly not impossible to imagine that a functional stable productive economy might coexist with a rapidly inflating - or deflating - currency.
But the simulation doesn't do much to validate that concept. It introduced inflation to a group of agents who never think about the future value of their goods or money.
In a runaway inflation situation, some producers of apples aren't going to sell you apples today for 1,000 Simoleons, when they know tomorrow those apples will fetch 1,100 Simoleons... and by Friday they'll be worth 10,000. And some holders of Simoleons will think 'These 10,000 Simoleons could buy be ten apples today, but tomorrow they'll only buy me 9, and by Friday they'll only buy me one... so I should buy 10 apples today, then sell them on Friday'.
Without capital accumulation, time valued money, or investment, this simulation barely scratches the surface of what effects inflation has on an economy.
But the simulation doesn't do much to validate that concept. It introduced inflation to a group of agents who never think about the future value of their goods or money.
In a runaway inflation situation, some producers of apples aren't going to sell you apples today for 1,000 Simoleons, when they know tomorrow those apples will fetch 1,100 Simoleons... and by Friday they'll be worth 10,000. And some holders of Simoleons will think 'These 10,000 Simoleons could buy be ten apples today, but tomorrow they'll only buy me 9, and by Friday they'll only buy me one... so I should buy 10 apples today, then sell them on Friday'.
Without capital accumulation, time valued money, or investment, this simulation barely scratches the surface of what effects inflation has on an economy.
> so I should buy 10 apples today, then sell them on Friday'
Simulation might also want to take into account that you can’t stock pile apples indefinitely before they spoil.
Simulation might also want to take into account that you can’t stock pile apples indefinitely before they spoil.
This is super cool, but it models a non-capitalist economy, akin to the Rawlsian "property owning democracy".
There is no accounting for capital goods. Interest in terms of numeraire is modeled in an internally coherent way, but this is not reflective of how distributional struggles between owners of means of production and workers play out (or, to be precise, among agents whose property ownership levels are not unimodal, which is the inevitable result of capitalist social relations).
The distinctive characteristic of a capitalist economy is that the direct producers are separated from their means of production, such that they must sell their ability to work to those who own said means. Throughout the modern period, there has been a strong desire to have a market economy without this separation into classes.
Without capital and wage labor, the author's assumption that terms of exchange are determined by producer/consumer preferences (their "quality of life" function). But in reality world capitalist economies, the capital relation instead constrains behavior to ensure the endless expansion of capital (the so-called "valorization imperative").
It is important to note that a society with produced means of production, which are commonly referred to as "capital goods" or "producer goods", need not be a capitalist society in principle.
On a completely different note, at first glance it seems that this model could be expressed as a convex program, possibly even a linear program?
There is no accounting for capital goods. Interest in terms of numeraire is modeled in an internally coherent way, but this is not reflective of how distributional struggles between owners of means of production and workers play out (or, to be precise, among agents whose property ownership levels are not unimodal, which is the inevitable result of capitalist social relations).
The distinctive characteristic of a capitalist economy is that the direct producers are separated from their means of production, such that they must sell their ability to work to those who own said means. Throughout the modern period, there has been a strong desire to have a market economy without this separation into classes.
Without capital and wage labor, the author's assumption that terms of exchange are determined by producer/consumer preferences (their "quality of life" function). But in reality world capitalist economies, the capital relation instead constrains behavior to ensure the endless expansion of capital (the so-called "valorization imperative").
It is important to note that a society with produced means of production, which are commonly referred to as "capital goods" or "producer goods", need not be a capitalist society in principle.
On a completely different note, at first glance it seems that this model could be expressed as a convex program, possibly even a linear program?
"If you wish to build an economy simulator from scratch, you must first invent the universe."
> even though we made public servants numerous and quite rich in the process. This is a communist dream.
Aside from this nonsense remark, it was an entertaining post.
We should have one that's more based on incentives instead. Separate people from companies, create labor and make companies only care about profits at all cost.
Finally, add a finite amount of resources and let's play it out.
Aside from this nonsense remark, it was an entertaining post.
We should have one that's more based on incentives instead. Separate people from companies, create labor and make companies only care about profits at all cost.
Finally, add a finite amount of resources and let's play it out.
This is amazing.
This is cute but very different from what an economist would consider interesting.
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I have also implemented greedy algorithms.
OT: I see economists of various ideological tilts constantly arguing about how macroeconomic variables will respond to specific government policies. You know: "this new tax will increase inflation; no it will not, it will increase unemployment".
What I don't get is why there are no readily available online macroeconomic simulators with real world data that make these sort of predictions. For a lot of countries, up-to-date macroeconomic and demographic is readily available.
Surely, economists of every ideological tilt have their own standard model of macroeconomics [1] which they use to make rough predictions? If not, how complicated is it really?
[1] Much like the standard model of particle physics or of cosmology. Fairly dirty and complicated models with lots of tunable parameters.
What I don't get is why there are no readily available online macroeconomic simulators with real world data that make these sort of predictions. For a lot of countries, up-to-date macroeconomic and demographic is readily available.
Surely, economists of every ideological tilt have their own standard model of macroeconomics [1] which they use to make rough predictions? If not, how complicated is it really?
[1] Much like the standard model of particle physics or of cosmology. Fairly dirty and complicated models with lots of tunable parameters.
>[1] Much like the standard model of particle physics or of cosmology. Fairly dirty and complicated models with lots of tunable parameters.
Anyone capable of making models that can predict the future with a reasonable degree of accuracy is probably in finance, making 5-10x what they could in economics. The economy is an incredibly complex system, subject to emergent behaviour and chaotic effects, much more so than in physics. You'll see papers from the large hadron collider where they prove stuff to within p=0.000001; it's impossible to prove anything to that degree of confidence in economics. Especially because it's not possible to create true controlled experiments: you can't have two otherwise identical societies that differ by just one factor, rather there will always be other ways in which they differ to, and how these are accounted for can have a big effect on the output of models.
Anyone capable of making models that can predict the future with a reasonable degree of accuracy is probably in finance, making 5-10x what they could in economics. The economy is an incredibly complex system, subject to emergent behaviour and chaotic effects, much more so than in physics. You'll see papers from the large hadron collider where they prove stuff to within p=0.000001; it's impossible to prove anything to that degree of confidence in economics. Especially because it's not possible to create true controlled experiments: you can't have two otherwise identical societies that differ by just one factor, rather there will always be other ways in which they differ to, and how these are accounted for can have a big effect on the output of models.
Any model has some precision associated with it. I am not asking for 5 sigma level of precision. But if the economists are fighting about what will happen to a particular macroeconomic variable, they are making a prediction even if it is a log_2(3) bit prediction [1]. There must be some math that is backing that. I want to see it explicitly put into a computational model that runs on live data. Otherwise is there any real content to the arguments that economists are having?
> Especially because it's not possible to create true controlled experiments
Cosmology has zero-experiments. It is a completely observational science [2]. And in fact, has very bad data. Basically a time-frozen snapshot of the universe from a particular point in space. They can't even make predictions about the future, only about what some new dataset of that same time-frozen universe will say. Economics on the other hand has the benefit of lots data about interventions and their consequences. There is so much opportunity to develop models by making predictions and checking what happens.
[1] variable goes up or down or stays the same.
[2] The fact that the roots of modern science lie in a purely observational no-experiment discipline of astronomy is lost on many.
> Especially because it's not possible to create true controlled experiments
Cosmology has zero-experiments. It is a completely observational science [2]. And in fact, has very bad data. Basically a time-frozen snapshot of the universe from a particular point in space. They can't even make predictions about the future, only about what some new dataset of that same time-frozen universe will say. Economics on the other hand has the benefit of lots data about interventions and their consequences. There is so much opportunity to develop models by making predictions and checking what happens.
[1] variable goes up or down or stays the same.
[2] The fact that the roots of modern science lie in a purely observational no-experiment discipline of astronomy is lost on many.
> But if the economists are fighting about what will happen to a particular macroeconomic variable, they are making a prediction even if it is a log_2(3) bit prediction [1]. There must be some math that is backing that. I want to see it explicitly put into a computational model that runs on live data
This is what (some) people in finance do: make models to predict things, because if something about the future can be predicted to a sufficient degree of accuracy, it's generally possible to make money from it. In economics, the incentives are slightly different; in academia, the incentives are to publish interesting/novel/topical papers, like with other social sciences, not necessarily to make repeatable predictions. In social science nobody gets punished for making an interesting model that hasn't been rigorously proven to make repeatable predictions, while in finance on average better models make more money and get rewarded more. But sharing an effective model means other people can use the predictions too, meaning you capture less value from the predictions yourself, so people with an effective model have an incentive not to share it
This is what (some) people in finance do: make models to predict things, because if something about the future can be predicted to a sufficient degree of accuracy, it's generally possible to make money from it. In economics, the incentives are slightly different; in academia, the incentives are to publish interesting/novel/topical papers, like with other social sciences, not necessarily to make repeatable predictions. In social science nobody gets punished for making an interesting model that hasn't been rigorously proven to make repeatable predictions, while in finance on average better models make more money and get rewarded more. But sharing an effective model means other people can use the predictions too, meaning you capture less value from the predictions yourself, so people with an effective model have an incentive not to share it
Few scientific hypothesis have been tested by so much money as that there is no alpha in the market. I mean, the amount of money that goes into proving that wrong is perhaps larger than what went into finding the Higgs boson.
Best you can get is some bounds for whatever effect you want to predict and those bounds will open wide very fast.
As for lots of data, doing proper econometric models requires really well gathered data. Data is published quarterly or yearly, so you do have comparable series for international country level macroeconomics, but those are actually short considering how many variables must interact.
As for lots of data, doing proper econometric models requires really well gathered data. Data is published quarterly or yearly, so you do have comparable series for international country level macroeconomics, but those are actually short considering how many variables must interact.
> I want to see it explicitly put into a computational model that runs on live data.
I _also_ want to see it. But I do not want to build it, since it seems incredibly boring.
I _also_ want to see it. But I do not want to build it, since it seems incredibly boring.
> What I don't get is why there are no readily available online macroeconomic simulators with real world data that make these sort of predictions.
Are you high or what?
The problem is so complex that people don't even agree how to take a measurement, let alone how to simulate the system. If nowadays people disagree when looking at the same numbers, imagine if each one could point to the numbers in his own simulator.
Are you high or what?
The problem is so complex that people don't even agree how to take a measurement, let alone how to simulate the system. If nowadays people disagree when looking at the same numbers, imagine if each one could point to the numbers in his own simulator.
Lets take a very particular variable. Every month or so, central/state banks in every country have a meeting to decide the policy rate. They look at some data and the output of some models, then wave some political magic wand over it and make a decision about which direction to move the rate. Then they make a statement like, "our decision will decrease inflation over the next three quarters by this much."
The data they use is usually publicly available, the models used by these must not be very secret. Is it not possible to hook this all up into a nice package, where I can go in and tune some knobs to my liking (there will always be knobs) to get a prediction on the inflation over the next three quarters.
Then, I can publicly claim, "Given this data, and this model, and my knob settings, here are my prediction." Then some other economist can come and dispute the data, model and the knob settings. They select a different data source, model and their own knobs.
Then three quarters later we check who made the right prediction.
Notice, I am not asking for the correct model of reality. Only a playground where people can argue using concrete data, models and knobs.
The data they use is usually publicly available, the models used by these must not be very secret. Is it not possible to hook this all up into a nice package, where I can go in and tune some knobs to my liking (there will always be knobs) to get a prediction on the inflation over the next three quarters.
Then, I can publicly claim, "Given this data, and this model, and my knob settings, here are my prediction." Then some other economist can come and dispute the data, model and the knob settings. They select a different data source, model and their own knobs.
Then three quarters later we check who made the right prediction.
Notice, I am not asking for the correct model of reality. Only a playground where people can argue using concrete data, models and knobs.
The Danish Ministry of Finance has a public model they use to forecast the economic impact of certain policy decisions called MAKRO: https://github.com/DREAM-DK/MAKRO/tree/main
Ok fine. My strong reaction was really due to the use of the word "simulator".
But if you say model - yeah, central banks do that. I'm not really familiar how public their models are. I would bet you that they intentionally don't want people to know "here's the exact model and here's the exact inputs", because they want to keep some discretion for themselves. They want to be able say "I know that this model with these inputs says X, but as a thinking human being I know that the model doesn't account for Y which has been crucial in these past few months, and so instead of X we'll do Z".
What you said makes a lot of sense, but it would require collaboration from the decision makers. There's no incentive, I believe, for someone to do this "open source stye", because the moment that their effort pays off, some hedge fund will take it and use it to trade on it.
But if you say model - yeah, central banks do that. I'm not really familiar how public their models are. I would bet you that they intentionally don't want people to know "here's the exact model and here's the exact inputs", because they want to keep some discretion for themselves. They want to be able say "I know that this model with these inputs says X, but as a thinking human being I know that the model doesn't account for Y which has been crucial in these past few months, and so instead of X we'll do Z".
What you said makes a lot of sense, but it would require collaboration from the decision makers. There's no incentive, I believe, for someone to do this "open source stye", because the moment that their effort pays off, some hedge fund will take it and use it to trade on it.
The only real rule in economics, other than simple accounting identities, is that people will do what they think is best for themselves. But everyone's utility curve is different, let alone their perception of their utility curve. It's incredibly difficult to rigorously model.
At sufficiently large scale we should be able to model certain personalities though.
Imo a decent economics simulator is indistinguishable from a full physics simulator. There’s no other way to account for the actions of millions of independent actors with unique incentives. Econ models tend to focus on very specific independent variables and hold everything else constant because there are just too many dimensions to consider in a full model
> What I don't get is why there are no readily available online macroeconomic simulators with real world data that make these sort of predictions.
You aren't the first person to have this thought. It just turns out to be incredibly difficult.
You aren't the first person to have this thought. It just turns out to be incredibly difficult.
Sounds like we need wikiconomy crowd-sourced model building over two open-source platforms:
- mathematical macro-economic simulation run by differential dependencies (like Minsky)
- agent-based Monte-Carlo platform for behavioural experiments to find or validate the macro rules
There would be a core set of models, with parametrized instances running for each country, loosely coupled through trade flows, capital flows, FX markets and migration.
- mathematical macro-economic simulation run by differential dependencies (like Minsky)
- agent-based Monte-Carlo platform for behavioural experiments to find or validate the macro rules
There would be a core set of models, with parametrized instances running for each country, loosely coupled through trade flows, capital flows, FX markets and migration.
My point is that tons of people have wanted to do this and tried and failed. There is too much to model and existing models don't have predictive power. Basically when calibrating the models there will multiple sets of parameters that fit past data and produce wildly different predictions. If you could devise a general macroeconomic model that made accurate predictions you could become ludicrously wealthy. Even accurately predicting corn prices 5 years out would net you considerable returns.
So many things that effect economic behavior just aren't really quantifiable. Even Keynes who was a proponent of modeling and economic planning acknowledged this[1]. Hayek talked about information being too decentralized and preferences arising organically, which made planning(modeling) imprecise and inefficient if not impossible[2].
[1] https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
[2] https://www.kysq.org/docs/Hayek_45.pdf
So many things that effect economic behavior just aren't really quantifiable. Even Keynes who was a proponent of modeling and economic planning acknowledged this[1]. Hayek talked about information being too decentralized and preferences arising organically, which made planning(modeling) imprecise and inefficient if not impossible[2].
[1] https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
[2] https://www.kysq.org/docs/Hayek_45.pdf
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Why do you think economics is as deterministic as particle physics? Why should a simulation be any more informative than an economist's assumptions?
Particle physics isn't that deterministic either. It uses a lot of statistical tricks and hard engineering to reach its results. That's why there are so many physicists working as quants.
Economics is a science and what an economist calls economics is not what the market things an economist knows.
In a science you are interested in testing hypothesis.
Econometric/statistical models will generally serve to test general hypothesis. What happens if we raise interest rates? Will inflation go down? This can be tested in many ways. But it is not a concern to actually predicate the values of macroeconomic variables. It’s really not interesting academically and basically impossible to do right.
This is of course completely out of vogue since ML wiped out the scientific method education of us all.
In a science you are interested in testing hypothesis.
Econometric/statistical models will generally serve to test general hypothesis. What happens if we raise interest rates? Will inflation go down? This can be tested in many ways. But it is not a concern to actually predicate the values of macroeconomic variables. It’s really not interesting academically and basically impossible to do right.
This is of course completely out of vogue since ML wiped out the scientific method education of us all.
Because a good model would be like a self-defeating prophecy.
but but ... you cannot have data get in the way of good theory.
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Where are the bad actors who exploit the system to steal from everyone? No economic simulator is complete without this.
Edit>> It appears to be the state.
Edit>> It appears to be the state.
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No banks, no capital, no capitalists living off the workers' labour. This is not even close how the economy works.
You know banks exist outside of capitalism, no?
While it's true that banks can exist outside capitalism, capitalists generally can't.
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The parent's point is that an economic simulator that does not include them is probably not something that's useful to draw conclusions about capitalist societies from.
It is a fun toy, though.
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The parent's point is that an economic simulator that does not include them is probably not something that's useful to draw conclusions about capitalist societies from.
It is a fun toy, though.
> While it's true that banks can exist outside capitalism, capitalists generally can't.
That's not really true; people who own and profit from their ownership of the means of production exist in feudal economies; the fact that their ownership of the means of production is a sonetimes a consequence of rights associated with land tenure and, whether or not that is the case, not marketable or less freely so than under capitalism the capital, makes the system not capitalism, but doesn't make the owners of capital not capitalists.
Capitalists qua capitalists aren’t the ruling class outside of capitalism (though being a capitalist was also a subordinate part of being part of the labded aristocracy, and control of certain elements of the means of production was connected to land tenure), but they still can exist. Capitalism as a system is mostly a result of the non-landholding capitalists progressively leveraging their existing wealth to gain more systemic advantage (at the express of the landed aristocracy) than they enjoyed in pre-capitalist economies.
That's not really true; people who own and profit from their ownership of the means of production exist in feudal economies; the fact that their ownership of the means of production is a sonetimes a consequence of rights associated with land tenure and, whether or not that is the case, not marketable or less freely so than under capitalism the capital, makes the system not capitalism, but doesn't make the owners of capital not capitalists.
Capitalists qua capitalists aren’t the ruling class outside of capitalism (though being a capitalist was also a subordinate part of being part of the labded aristocracy, and control of certain elements of the means of production was connected to land tenure), but they still can exist. Capitalism as a system is mostly a result of the non-landholding capitalists progressively leveraging their existing wealth to gain more systemic advantage (at the express of the landed aristocracy) than they enjoyed in pre-capitalist economies.
If you separate capitalists and landlords out as different classes (in the Georgist sense) then you can say that landlords have extracted rent for far longer than capitalists have been around; it took the Industrial Revolution to move from the guild-based master and apprentice model to a capital-based owner and worker model of production.
That's exactly my point. It's clear both from banking history as well as general history and experience living in a communist country for a while.
Yes.
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Sounds like something an LLM could help with. You could write rules in natural language, and the system would automatically convert it into simple code.
https://en.m.wikipedia.org/wiki/MONIAC