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Building an economy simulator from scratch

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Re: Building an economy simulator from scratch

#141

Post by robertlagrant »

threatripper wrote: post #137
mordae wrote: post #136

Earlier quoted context omitted.

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.

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 cann…

> 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.

Re: Building an economy simulator from scratch

#142

Post by Aeolun »

econperplexed wrote: post #26
logicchains wrote: post #14

Earlier quoted context omitted.

>[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…

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…

> 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.

Re: Building an economy simulator from scratch

#143

Post by Aeolun »

HDThoreaun wrote: post #72
econperplexed wrote: post #9

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…

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.

Re: Building an economy simulator from scratch

#144

Post by stevenjgarner »

js8 wrote: post #82

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…

So if you feel that way, why not program your own model introducing the "concept of capital, private property, and labor market"?

Re: Building an economy simulator from scratch

#146

Post by imtringued »

nvy wrote: post #132
neilwilson wrote: post #131

" 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 t…

>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 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.

Re: Building an economy simulator from scratch

#147

Post by js8 »

stevenjgarner wrote: post #144
js8 wrote: post #82

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…

So if you feel that way, why not program your own model introducing the "concept of capital, private property, and labor market"?

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.

Re: Building an economy simulator from scratch

#148

Post by denton-scratch »

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.

Re: Building an economy simulator from scratch

#149

Post by tomatocracy »

mordae wrote: post #136
nvy wrote: post #132

Earlier quoted context omitted.

>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.

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.

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.

Re: Building an economy simulator from scratch

#150

Post by nonrandomstring »

denton-scratch wrote: post #148

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 street…

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"

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