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Simulated Economy Tutorial

jasonfantl.com

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Re: Simulated Economy Tutorial

#21

Post by [deleted] »

onlyrealcuzzo wrote: post #8
jgord wrote: post #4

Just 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…

We already have tons of those models. None of them are perfect. And they never will be. Could the be better? Yes. The problem is, you won't really know they're better until post-ex. And even then, you'll never be sure how much better. They're always bound to fail catastrophically at some point. Etc.

[deleted]

Re: Simulated Economy Tutorial

#22

Post by mym1990 »

jgord wrote: post #4

Just 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…

While your last point is certainly an ideal to aspire to, something tells me that the powers that be would not actually want to get rid of booms and busts, because ultimately that is where a lot of the “wealth” for those high up is created. You don’t really need complex models to solve the problem of some humans being really, really greedy, driving markets to overheat, ending in catastrophic failure.

Re: Simulated Economy Tutorial

#23

Post by noitpmeder »

dlojudice wrote: post #15
huitzitziltzin wrote: post #12

Earlier quoted context omitted.

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...

Sure, just don't necessarily sell them as "more realistic" if they're not performing as well in real situations

Re: Simulated Economy Tutorial

#24

Post by noosphr »

jgord wrote: post #4

Just 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…

>we do need and should have good fine-grain computational models of complex systems such [...] the global economy.

Many years ago when 'social graphs' were still a hot area to do research in I started building a simulation of the equivalent of a small medieval village.

What became quickly apparent is that you didn't just need interactions between any two individuals like classical social graphs talked about, but between any number of arbitrary groups of individuals. Otherwise something as simple as an extended family couldn't be modeled.

That meant that instead of being able to use a matrix as the fundamental data structure you'd need a tensor of rank N, where N is the number of people in the economy. Just to see how intractable this is if the village had 20 people in it with the traditional matrix approach you'd need 400 weights to model interactions. With the tensor approach you need ~1e+26.

In short: it's impossible to have fined grained simulations of complex societies. The best we can do is drastic over simplifications that give us _some_ predictive power.

Re: Simulated Economy Tutorial

#25

Post by abdullahkhalids »

huitzitziltzin wrote: post #12
dlojudice wrote: post #2

Agent-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.

Neural network based computer vision models also existed for decades. They weren't very good and weren't really used, till early 2010s when people figured out how to make them work. Now they are vastly superior to all the other ways.

This is quite common across the sciences. Some technique doesn't seem to work because of missing crucial insights or technology. Then somebody fills the gaps, and the technique works.

These types of models in economics might or might not become viable at some point.

Re: Simulated Economy Tutorial

#26

Post by abdullahkhalids »

noosphr wrote: post #24
jgord wrote: post #4

Just 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…

>we do need and should have good fine-grain computational models of complex systems such [...] the global economy. Many years ago when 'social graphs' were still a hot area to do research in I started building a simulation of the equivalent of a small medieval village. What became quickly apparent is that you didn't just need interactions between any two individuals like classical social graphs talked about, but betw…

A set of size N=20, has total number of subsets equal to 2^N = 1.05 million. You must have had other degrees of freedom to bump that to 1E26.

Re: Simulated Economy Tutorial

#27

Post by noosphr »

abdullahkhalids wrote: post #26
noosphr wrote: post #24

Earlier quoted context omitted.

>we do need and should have good fine-grain computational models of complex systems such [...] the global economy. Many years ago when 'social graphs' were still a hot area to do research in I started building a simulation of the equivalent of a small medieval village. What became quickly apparent is that you didn't just need interactions between any two individuals like classical social graphs talked about, but betw…

A set of size N=20, has total number of subsets equal to 2^N = 1.05 million. You must have had other degrees of freedom to bump that to 1E26.

That's only for two way relationships, you need N way relationships, which is N^N.

Re: Simulated Economy Tutorial

#28

Post by wordpad »

noosphr wrote: post #27
abdullahkhalids wrote: post #26

Earlier quoted context omitted.

A set of size N=20, has total number of subsets equal to 2^N = 1.05 million. You must have had other degrees of freedom to bump that to 1E26.

That's only for two way relationships, you need N way relationships, which is N^N.

Wouldn't you be able to quickly prune away invalid/unlikely interactions? Maybe, have some cutoff based on proximity of members or something?

Re: Simulated Economy Tutorial

#30

Post by DonaldPShimoda »

abdullahkhalids wrote: post #25
huitzitziltzin wrote: post #12

Earlier quoted context omitted.

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.

Neural network based computer vision models also existed for decades. They weren't very good and weren't really used, till early 2010s when people figured out how to make them work. Now they are vastly superior to all the other ways. This is quite common across the sciences. Some technique doesn't seem to work because of missing crucial insights or technology. Then somebody fills the gaps, and the technique works. Th…

"The models might become viable at some point" is very different from the original claim at the top level of this comment chain, though, which made a positive assertion that agent-based models are better. The parent comment to yours was right to call out that claim, and it offered a reasonable basis for that counterargument at the same time.
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