Simulated Economy Tutorial
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Simulated Economy Tutorial
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Re: Simulated Economy Tutorial
#2Agent-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...
Re: Simulated Economy Tutorial
#3Agent-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...
Neat, now I'm curious. Can you explain why?
Re: Simulated Economy Tutorial
#4Just 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 - shipping blackades / blockages - regional war - extreme weather events - earthquake - regional epidemic - giving poor people cash grants - free higher education - science research grants - skilled immigration / emigration
But .. of course this would require something like a rich country providing grants to applied cross disciplinary research over many years.
It might even lead to insights that prevent semi-regular economic boom and bust cycles we experienced the past 100 years.
Re: Simulated Economy Tutorial
#5Agent-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...
stands to reason .. if we assume the actual economy is full of autonomous agents [ people, companies, governments ] acting largely in self interest.
Re: Simulated Economy Tutorial
#6Agent-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...
Neat, now I'm curious. Can you explain why?
Agent-based models capture the messy reality of economic systems by simulating heterogeneous actors making local decisions with imperfect information, allowing for emergent phenomena, non-linear dynamics, and adaptation over time, precisely the features that equilibrium models abstract away through unrealistic assumptions of perfect rationality, homogeneity, and static optimization that fail to predict or explain crises, bubbles, and technological disruptions that define actual economic evolution. To be honest, ABMs aren't perfect either. They face challenges with calibration, validation against empirical data, computational limitations, etc.
Re: Simulated Economy Tutorial
#7Agent-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...
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 think its not a stretch to imagine that a) there is a way to simulate the whole economy at the same level of quality as a weather or climate simulation b) AI can accelerate the computations to the point they can run on accessible hardware.
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 simply result in the cost of rent going up to absorb the whole amount ?
Re: Simulated Economy Tutorial
#8Just 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.
Re: Simulated Economy Tutorial
#9Agent-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...
Thanks for the link. If anyone has additional links, including scholarly references, this is an area of huge interest to me but I wouldn't know where to turn to for the latest research and models.
Re: Simulated Economy Tutorial
#10Just 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 as the cell .. and the global economy.
Thanks to the pioneering work done by physicists, we realized we could simulate dimension reduced versions of reality instead. We call them statistics and differential equations :)
Stack enough of them together, you get something called "deep learning". Large scale national lab supercomputer type numerical simulations are for your grandparents (these days you can probably take shortcuts and simulate that sort of born secret computations in a neural net that is much more compute efficient than the typical supercomputer).