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Building an economy simulator from scratch
- dave333 3y agoProf Steve Keen has developed a free tool called Minsky for economic modeling as well as many models: https://www.youtube.com/@ProfSteveKeen https://www.youtube.com/@ProfSteveKeen
- sweetrobot2k 3y ago[dead]
- deleted 3y ago[deleted]
- fmiras 3y agoI 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
- gorenb 3y agoThis is amazing.
- orangepurple 3y agoGreat 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.
- econorew 3y agoAll of this is emergent behaviour. Agents need to be smarter and the networks need to be larger and information needs to have a cost.
- rsrsrs86 3y agoOne 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.
- nylonstrung 3y agoA 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
- rsrsrs86 3y agoUndergrad 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.
- lainga 3y agoConsider examining different utility functions and substitutable goods
- rsrsrs86 3y agoThis. At least a general equilibrium model.
- 0xADADA 3y agodont' mistake a beautiful map for the territory, you'll find yourself lost amongst lines that aren't a real place.
- sunday_serif 3y agoOn 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 https://kwarc.info/teaching/TDM/Borges.pdf
- noonething 3y agoI 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.
- The_Blade 3y agonice, 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
- barrysteve 3y agoBut a massive precise map is the perfect seed for a useful simplified map. Simplifying from a non-complex source is a waste of time.
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- Nezteb 3y agoIs the source code for this simulator available anywhere? The post's code itself is minimized/obfuscated: https://thomassimon.dev/assets/cashloss.1fca21f6.js 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.
- ldd 3y agoNot 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 https://github.com/ldd/economy-test/tree/master
- Ruddle 3y agoAuthor again, https://github.com/Ruddle/EconomySimulator https://github.com/Ruddle/EconomySimulator
- Ruddle 3y agoAuthor here, if there is enough interest I can clean the code up and put it on GitHub. It is basically a state machine.
- codeonline 3y agoI'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.
- coderintherye 3y agoI'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 https://editor.p5js.org/PhilipRosedale/sketches/odl5elMWy
- xwdv 3y ago
- Supply5411 3y agoWhere 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.
- deleted 3y ago[deleted]
- NoMoreNicksLeft 3y agoThis 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.
- marcosdumay 3y ago> 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.
- econperplexed 3y agoOT: 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.
- redandblack 3y agobut but ... you cannot have data get in the way of good theory.
- ttymck 3y agoWhy do you think economics is as deterministic as particle physics? Why should a simulation be any more informative than an economist's assumptions?
- KRAKRISMOTT 3y agoParticle 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.
- logicchains 3y ago>[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.
- Supply5411 3y agoSimulation 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.
- epicureanideal 3y agoSounds like state workers in California
- vanrysss 3y agoSee LA lifeguards making $300k/yr https://lamag.com/news/the-highest-paid-lifeguard-in-l-a-makes-over-500000 https://lamag.com/news/the-highest-paid-lifeguard-in-l-a-mak...
- mapmap 3y agoHow does this happen?
- lotsofpulp 3y agoEvery 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.
- jampekka 3y agoNo banks, no capital, no capitalists living off the workers' labour. This is not even close how the economy works.
- deleted 3y ago[deleted]
- random3 3y agoYou know banks exist outside of capitalism, no?
- jampekka 3y agoYes.
- vkou 3y agoWhile it's true that banks can exist outside capitalism, capitalists generally can't. --- 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.
- dragonwriter 3y ago> 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.
- deleted 3y ago[deleted]
- Workaccount2 3y agoI'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.
- ilyt 3y agoI had hopes for Victoria 3 but it didn't exactly stick the landing
- andrewmutz 3y agoIt'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.
- michael_j_x 3y agostar citizen with its quantum economic simulator is close enough: https://www.boredgamer.co.uk/2020/04/24/star-citizens-quantum-universe-simulation/ https://www.boredgamer.co.uk/2020/04/24/star-citizens-quantu...
- dragontamer 3y agoTropico 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.
- 0cf8612b2e1e 3y agoEve Online? They even used to employ an economist to monitor the state of the game.
- theptip 3y agoNot 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.
- SpaceManNabs 3y agoThis website is really cool (not just the post). Thomas must have put a decent amount of work. How to find the secrets?
- bagpuss 3y agoThe MONIAC built in the 1950s by Bill Phillips (of Phillips curve fame) attempted to model economic processes with coloured water (fluidic logic) https://en.m.wikipedia.org/wiki/MONIAC https://en.m.wikipedia.org/wiki/MONIAC
- mhh__ 3y agoHave never been able to ascertain what model it actually uses e.g. a system of linear equations, if so which ones?
- deleted 3y ago[deleted]
- JellyBeanThief 3y agoI just love whenever the roundworld equivalent of something I first encountered on the discworld pops up in front of me.
- bthallplz 3y ago:D It goes both ways! Having known about it prior, it was very exciting to read about it in Discworld.
- _the_inflator 3y agoVividness has its advantages. You could call it a simulator as well as one of the world's first dashboards as well.
- zwieback 3y agoThis 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 https://en.wikipedia.org/wiki/MONIAC
- Terr_ 3y agoMONIAC 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.
- amelius 3y agoSounds like something an LLM could help with. You could write rules in natural language, and the system would automatically convert it into simple code.
- sweetrobot2k 3y ago[dead]
- nologic01 3y agoBeautifully 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.
- keskival 3y agoThe 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.
- smitty1e 3y agoThe "good" news is that gravity hates the Tower of Babel that every society inevitably produces.
- vkou 3y agoThe "bad" news is that this kind of gravity tends to get called things like "The Reign of Terror".
- smitty1e 3y agoNo, 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.
- jeezfrk 3y ago
- keithalewis 3y agohttps://www.nobelprize.org/prizes/economic-sciences/1973/leontief/biographical/ 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.
- JoeyBananas 3y agoI have also implemented greedy algorithms.
- logicallee 3y agoGreat 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.
- Ruddle 3y agoAuthor 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.
- logicallee 3y agoInteresting, 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.
- Nezteb 3y agoI'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 https://machinations.io
- js8 3y agoFirst, 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.
- kamel3d 3y agoWould 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.
- js8 3y agoYeah, 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.
- rsrsrs86 3y agoThis is cute but very different from what an economist would consider interesting.
- rsrsrs86 3y agoOne 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.
- Galanwe 3y agoI don't think the objective is realism here, but rather education. Also, I'm not convinced "rationality" is key in reaching realism.
- kamel3d 3y agoIn 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.
- Galanwe 3y agoThat's more or less what every quantitative hedge fund out there is doing.
- rsrsrs86 3y agoWith 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.
- Galanwe 3y agoWow, you have to be the super expert that unveiled the whole hedge fund scam. Thanks for your enlightening opinion.
- wordpad25 3y agoIt'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)
- deleted 3y ago[deleted]
- rsrsrs86 3y ago
- JoshMBN 3y agoI'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.
- Calamitous 3y agoI did not expect to read through and run every simulation. But I did.
- Ruddle 3y agoThe symmetry is nice. I did not expect to write, or code most of it. We were both taken by serendipity.
- motohagiography 3y agoThe game "Captain of Industry" might be a more complete simulation: https://store.steampowered.com/app/1594320/Captain_of_Industry/ https://store.steampowered.com/app/1594320/Captain_of_Indust... Big thread on it from last year here: https://news.ycombinator.com/item?id=31586833 https://news.ycombinator.com/item?id=31586833
- blamestross 3y agoBeware 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.
- imathew 3y ago"If you wish to build an economy simulator from scratch, you must first invent the universe."
- dools 3y agoThis 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.
- gsuuon 3y agoThat'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.
- WalterBright 3y agoMay I present HAMURABI: https://www.atariarchives.org/basicgames/showpage.php?page=78 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.
- tnecniv 3y agoWas not expecting to see an Atari game produced in my home town today
- jfantl 3y agoI 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)/ https://jasonfantl.com/posts/Simulated-Economy-(1)/
- algas 3y agoGreat series! I liked your addition of inter-process communication, and the last one was a treat.
- throwaway290 3y agoTo simulate economy, you need to simulate individuals with their wants and needs and relationships and the environment, as simple (complex) as that.
- neilwilson 3y ago" 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.
- nvy 3y ago>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.
- jschveibinz 3y agoThis is largely correct. Commercial banks are permitted to leverage deposits (Tier 1 capital) by a large ratio. If a bank lends $10 for every $1 of capital reserves, it will have a capital leverage ratio of 1/10 = 10%. According to the Basel III standards, this ratio must be at least 3%, though country-wise regulations may vary. https://www.wallstreetmojo.com/leverage-ratios-for-banks/ https://www.wallstreetmojo.com/leverage-ratios-for-banks/ But money is also created in other ways. Here is a short article on how money creation, value creation and wealth creation are related: https://nickrogers.tech/money-creation-wealth-creation-value-creation https://nickrogers.tech/money-creation-wealth-creation-value... Cheers!
- mordae 3y agoThey still have to borrow the money from the central bank. Fractional reserves mean that the credited account's bank must deposit a portion of the money bank at central bank. So there is a limit to how much money can the bank create.
- teo_zero 3y agoAm I the only one to find the simulation deviate from the description starting from Simulation 8? For example, I see a farmer with 7 food, 7 water and 7 wood, buying water. According to the description, their QoL would be 7 both before and after the transaction, so they are not supposed to buy because there wouldn't be an increase of their QoL: > People are potential buyers of the resources that increase their quality of life Additionally the average QoL indicator seems wrong. This is what I see at step 72: Farmer 1: 50$ 6 6 5 => QoL 5 Farmer 2: 90$ 4 4 5 => 4 Farmer 3: 10$ 7 7 7 => 7 Avg QoL 3.0 How can 3.0 be the average?
- Ruddle 3y agoAuthor 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.
- teo_zero 3y agoThanks for the explanation. It makes perfectly sense.
- denton-scratch 3y agoIn 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.
- dkga 3y agoEconomist here. Why Modern Monetary Theory in particular? Just curious :)
- denton-scratch 3y ago> 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.
- nonrandomstring 3y agoIf 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/ https://ccl.northwestern.edu/netlogo/ [1] https://modelthinker.wordpress.com/ https://modelthinker.wordpress.com/ There is also the MIT "systems modelling for a complex world"
- ricksunny 3y ago+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. =)
- neilwilson 3y agoI’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)
- stephen_g 3y agoIf 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.
- littlestymaar 3y agoThis 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”.
- bwestergard 3y agoThis 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?
- Draiken 3y ago> 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.
- nayuki 3y agoThe dynamic price simulation reminds me of Primer ( https://www.youtube.com/@PrimerBlobs/videos https://www.youtube.com/@PrimerBlobs/videos ), specifically: https://www.youtube.com/watch?v=PNtKXWNKGN8 https://www.youtube.com/watch?v=PNtKXWNKGN8