You don't actually have to put a generated image at the top of every blog post guys.
Simulated Economy Tutorial
11–20 of 69 posts
Re: Simulated Economy Tutorial
#12Agent-based modeling offers a more realistic approach to economic systems than traditional equilibrium models. New approachs including generative agents (ABM+LLMs) are promising. J. Doyne Farmer's recent book "Making Sense of Chaos: A Better Economics for a Better World" is a great reading for those interested in this field. https://www.amazon.com/Making-Sense-Chaos-author/dp/02412019...
No. There is no macroeconomist who wouldn’t adopt these approaches if they were “better”.
Agent based models have been around since the 1980’s at least. No one uses them in central banks, no one uses them in industry, and you can be very confident that they’ve tried.
Re: Simulated Economy Tutorial
#13Primer is a youtube channel with a fantastic intuitive and gentle introduction to this topic:
https://www.youtube.com/watch?v=PNtKXWNKGN8
This paper from one of the field's pioneers is a nice introductory overview of the space from an academic perspective: https://faculty.sites.iastate.edu/tesfatsi/archive/tesfatsi/...
Re: Simulated Economy Tutorial
#14Just as we have weather forecasting, climate models .. we do need and should have good fine-grain computational models of complex systems such as the cell .. and the global economy. We should be able to have whole economy simulations give reasonable predictions in response to natural events and lever-pulling such as : - higher progressive tax rates - central bank interest rate moves - local tariffs and sanctions - sh…
If you had such a model you could arbitrage between Polymarket betting on wars and stock prices. There's not much of an incentive to release such a model publicly.
Re: Simulated Economy Tutorial
#15Agent-based modeling offers a more realistic approach to economic systems than traditional equilibrium models. New approachs including generative agents (ABM+LLMs) are promising. J. Doyne Farmer's recent book "Making Sense of Chaos: A Better Economics for a Better World" is a great reading for those interested in this field. https://www.amazon.com/Making-Sense-Chaos-author/dp/02412019...
No. There is no macroeconomist who wouldn’t adopt these approaches if they were “better”. Agent based models have been around since the 1980’s at least. No one uses them in central banks, no one uses them in industry, and you can be very confident that they’ve tried.
Sure, they've tried but it does not mean it hasn't evolved
https://www.centralbanking.com/central-banks/economics/macro...
https://www.bankofengland.co.uk/working-paper/2025/agent-bas...
Re: Simulated Economy Tutorial
#16Just as we have weather forecasting, climate models .. we do need and should have good fine-grain computational models of complex systems such as the cell .. and the global economy. We should be able to have whole economy simulations give reasonable predictions in response to natural events and lever-pulling such as : - higher progressive tax rates - central bank interest rate moves - local tariffs and sanctions - sh…
There’s a whole discipline which does nearly that, though they do not use this style of agent based model.
Generally agent based models have numerous parameters which can take many values (endowments, preferences) and the models don’t themselves give any guidance about how to set the parameters. Theory can give limited guidance (eg., that function is concave, this parameter is negative). Sometimes we have experimental data though its generalizability beyond the lab is uncertain.
What you want to do to create a scientific macroeconomics is to work backwards from the data you see in the economy (aggregate consumption, investment, etc.) and how you know the aggregates were generated (via the behavior of a lot of individual agents), and an equilibrium assumption to recover the parameters.
If you know the parameters of the model you assume, you can then simulate interesting counterfactuals. (And yes you assume the model - a “full” model including “all” of the individual endowments and parameters you can think of is completely intractable. You have to simplify.)
You’ll never get that out of the author’s computer game.
If you want references to the macro literature it’s enormous and I can provide them.
Re: Simulated Economy Tutorial
#17I wonder how those plots were made, they're neat. GNUplot?
Re: Simulated Economy Tutorial
#18I wonder how those plots were made, they're neat. GNUplot?
Looks like pure ebiten. https://github.com/JasonFantl/Simulated-Economy-Tutorial/blo...
Re: Simulated Economy Tutorial
#19Earlier quoted context omitted.
stands to reason .. if we assume the actual economy is full of autonomous agents [ people, companies, governments ] acting largely in self interest.
Demis Hassabis seems to describe a process whereby an AI can accelerate the results of billions of simulations by efficiently encoding that predictive behavior.. making something that is computationally expensive to simulate perhaps several orders of magnitude more tractable. This has proven out in the acceleration of actual weather prediction using AI which means it can be feasibly run on a single desktop machine. I…
> if we dole out UBI to everyone to cover basic living costs, will that simply result in the cost of rent going up to absorb the whole amount?
For that to be true, rent-seeking would have to literally capture all surplus. In which case UBI wouldn’t be an option in the first place.
The marginal increase in the purchasing power of someone who went from having $0 to $n would always be greater than the increase in purchasing power for someone who went from $1 billion to $1 billion + n - even with inflation.
Re: Simulated Economy Tutorial
#20Earlier quoted context omitted.
stands to reason .. if we assume the actual economy is full of autonomous agents [ people, companies, governments ] acting largely in self interest.
Demis Hassabis seems to describe a process whereby an AI can accelerate the results of billions of simulations by efficiently encoding that predictive behavior.. making something that is computationally expensive to simulate perhaps several orders of magnitude more tractable. This has proven out in the acceleration of actual weather prediction using AI which means it can be feasibly run on a single desktop machine. I…
> We need this whole economy simulation ... to answer practical questions such as - if we dole out UBI to everyone to cover basic living costs, will that
"How will humans (in aggregate) behave under novel conditions?"
Models tend to behave poorly when asked about things outside their training distribution.