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Simulated Economy Tutorial

106 points by jfantl 2y ago

exe34 2y ago
Predicting the weather helps save money for rich people. Predicting the economy might not be as profitable for them if everybody uses it. Booms and busts are a feature, not a bug.
dlojudice 2y ago
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/0241201977 https://www.amazon.com/Making-Sense-Chaos-author/dp/02412019...
- lamename 2y ago
  Neat, now I'm curious. Can you explain why?
  - dlojudice 2y ago
    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.
    - neilwilson 2y ago
      Not to mention non-ergodicity, path dependency and hysteresis.
- jgord 2y ago
  stands to reason .. if we assume the actual economy is full of autonomous agents [ people, companies, governments ] acting largely in self interest.
  - jgord 2y ago
    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 ?
    - LeonB 2y ago
      > 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.
    - tbrownaw 2y ago
      > 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.
- airstrike 2y ago
  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.
- huitzitziltzin 2y ago
  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.
  - dlojudice 2y ago
    Sure, they've tried but it does not mean it hasn't evolved https://www.centralbanking.com/central-banks/economics/macroeconomics/7972592/agent-based-models-come-of-age https://www.centralbanking.com/central-banks/economics/macro... https://www.bankofengland.co.uk/working-paper/2025/agent-based-modeling-at-central-banks-recent-developments-and-new-challenges https://www.bankofengland.co.uk/working-paper/2025/agent-bas...
    - noitpmeder 2y ago
      Sure, just don't necessarily sell them as "more realistic" if they're not performing as well in real situations
      - littlestymaar 2y ago
        Its not like the classical models are any good in terms for performance in real situations, as they have proven to be unable to predict anything over the past 40 years better than a basic linear extrapolation from the trend would have. Current macro-economics models are arguably not much better than a broken clock in terms of predicting power.
  - abdullahkhalids 2y ago
    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.
jgord 2y ago
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 - 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.
- onlyrealcuzzo 2y ago
  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 2y ago
    [deleted]
  - littlestymaar 2y ago
    In fairness we don't really have such models, at least not anymore. We used to, that's what “macro” economics was about. The models where crude but they did the job for a while, we used them for more than 30 years between the 40s and the late 70s, with great success (no economic crisis for the longest time since the industrial revolution). But they conflicted with the idea that economist made of their job, as these models didn't include any if the classical economics credo that economists had been worshipping for almost two centuries (markets, competition, scarcity, supply and demand, etc.). So people started building “micro-founded” macro models, that tried to reconcile the empirical models that worked with the ideological principles of classical economics. But you can't have good models if you design them to match an ideological paradigm. And then as you said, it failed catastrophically: the oil shock came, and suddenly the forecasts of the models became useless for a while. At that very moment, everyone who opposed to using models to justify state intervention where thrilled, and the era of short-terms economic engineering based on models was dead.
__loam 2y ago
You don't actually have to put a generated image at the top of every blog post guys.
cowpig 2y ago
Primer is a youtube channel with a fantastic intuitive and gentle introduction to this topic: https://www.youtube.com/watch?v=PNtKXWNKGN8 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/ACEOverviewBriefHistory.LTesfatsion.EconWP21004.LatestRevision.pdf https://faculty.sites.iastate.edu/tesfatsi/archive/tesfatsi/...
- littlestymaar 2y ago
  I love Primer, but this particular video has a fatal flaw which makes it converge to the same result as microeconomics: it considers seller's cost to be a marginal cost, which is zero when the rocket hasn't been sold and is paid when the rocket is sold. But that's absolutely not how real world market works, and a multi-agent simulation which has the ability to use different hypothesis (upfront costs) should definitely do so, because then we'd see a completely different result.
jszymborski 2y ago
I wonder how those plots were made, they're neat. GNUplot?
- heromal 2y ago
  Looks like pure ebiten. https://github.com/JasonFantl/Simulated-Economy-Tutorial/blob/master/1%2Feconomy%2Fgraphing.go https://github.com/JasonFantl/Simulated-Economy-Tutorial/blo...
  - nivertech 2y ago
    Are there similar non-GoLang libs or CLI tools?
DeathArrow 2y ago
Just as in the real world we don't spend most time fighting between each other or some monsters, it would be nice to have a MMO that focuses mostly on economic activities. By that I mean producing goods services and trading.
- RugnirViking 2y ago
  its really hard to make something like that fun. The real world economy is driven on asymmetrical inefficiencies and lack of information, things that wikis and game balance pretty much destroy. It's only fun to make money on say world of warcraft because most people aren't also doing that. (but instead buy your goods and use them for something essentially unproductive in economy-terms) Even then it can feel pretty stupid given the amount of arbitrage bots people have set up, you have to focus on very niche opportunities or oversights by those arbitrage bots. Kinda like the real economy
- tekla 2y ago
  Eve Online?
admiralrohan 2y ago
This is very very interesting. Want to hear some of the behind-the-scenes stories. What was the initial scope and how did you break down the whole project? As it's very hard to wrap around the whole thing at once.
cookiemonsieur 2y ago
can the economy even be predicted ? Was it ever done to any successful degree in the past ? And if so, to what end ? I like the idea conceptually, but it doesn't seem to be good enough to halt economic disasters (or correction as we like to call them nowadays).
HPsquared 2y ago
Related: MONIAC, a 1949 analogue computer macroeconomics simulator, with water flowing through the machine representing money and spending etc. https://en.m.wikipedia.org/wiki/Phillips_Machine https://en.m.wikipedia.org/wiki/Phillips_Machine Short clip: https://youtu.be/beuseJ0Wm3M https://youtu.be/beuseJ0Wm3M Detailed demo: https://youtu.be/gkNaZJmii28 https://youtu.be/gkNaZJmii28
strstr 2y ago
The most interesting toy economy I’ve seen has been d2jsp and its “forum gold”. Forum gold is primarily used as a fiat currency for diablo 2 trading. It’s a janky digital currency on a janky forum from like 20ish years ago, that’s still alive today. You can technically buy the currency from the forum, but in practice few do that. Most people just trade items to bootstrap. Having futzed with bartering in diablo (and non-fiat trading denominated in items of stable value), I quickly came to appreciate fiat currency. Being able to combine two “half trades” into an equivalent barter exchange is vastly easier. At one point I was able to trade some of the forum gold I accumulated from diablo 2 for a “perfect IV foreign Ditto” for shiny pokemon breeding.
- littlestymaar 2y ago
  The funniest thing is that d2jsp was originally the forum of a bot developer. Looks like bot runners where the one the most in need of a currency to make trades more efficient.
vannevar 2y ago
This is not so much a model economy as it is a model market. But still interesting to see the dynamics that emerge from even an algorithmically simple model when you have multiple agents interacting over time. For even a simple economy, I think you'd need to simulate money directly, and include the notions of rent and work.

106 points by jfantl 2y ago

Predicting the weather helps save money for rich people. Predicting the economy might not be as profitable for them if everybody uses it. Booms and busts are a feature, not a bug.

dlojudice 2y ago

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/0241201977 https://www.amazon.com/Making-Sense-Chaos-author/dp/02412019...

lamename 2y ago
Neat, now I'm curious. Can you explain why?
- dlojudice 2y ago
  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.
  - neilwilson 2y ago
    Not to mention non-ergodicity, path dependency and hysteresis.
jgord 2y ago
stands to reason .. if we assume the actual economy is full of autonomous agents [ people, companies, governments ] acting largely in self interest.
- jgord 2y ago
  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 ?
  - LeonB 2y ago
    > 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.
  - tbrownaw 2y ago
    > 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.
airstrike 2y ago
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.
huitzitziltzin 2y ago
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.
- dlojudice 2y ago
  Sure, they've tried but it does not mean it hasn't evolved https://www.centralbanking.com/central-banks/economics/macroeconomics/7972592/agent-based-models-come-of-age https://www.centralbanking.com/central-banks/economics/macro... https://www.bankofengland.co.uk/working-paper/2025/agent-based-modeling-at-central-banks-recent-developments-and-new-challenges https://www.bankofengland.co.uk/working-paper/2025/agent-bas...
  - noitpmeder 2y ago
    Sure, just don't necessarily sell them as "more realistic" if they're not performing as well in real situations
    - littlestymaar 2y ago
      Its not like the classical models are any good in terms for performance in real situations, as they have proven to be unable to predict anything over the past 40 years better than a basic linear extrapolation from the trend would have. Current macro-economics models are arguably not much better than a broken clock in terms of predicting power.
- abdullahkhalids 2y ago
  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.

jgord 2y ago

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 - 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.

onlyrealcuzzo 2y ago
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 2y ago
  [deleted]
- littlestymaar 2y ago
  In fairness we don't really have such models, at least not anymore. We used to, that's what “macro” economics was about. The models where crude but they did the job for a while, we used them for more than 30 years between the 40s and the late 70s, with great success (no economic crisis for the longest time since the industrial revolution). But they conflicted with the idea that economist made of their job, as these models didn't include any if the classical economics credo that economists had been worshipping for almost two centuries (markets, competition, scarcity, supply and demand, etc.). So people started building “micro-founded” macro models, that tried to reconcile the empirical models that worked with the ideological principles of classical economics. But you can't have good models if you design them to match an ideological paradigm. And then as you said, it failed catastrophically: the oil shock came, and suddenly the forecasts of the models became useless for a while. At that very moment, everyone who opposed to using models to justify state intervention where thrilled, and the era of short-terms economic engineering based on models was dead.

__loam 2y ago

You don't actually have to put a generated image at the top of every blog post guys.

cowpig 2y ago

Primer is a youtube channel with a fantastic intuitive and gentle introduction to this topic: https://www.youtube.com/watch?v=PNtKXWNKGN8 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/ACEOverviewBriefHistory.LTesfatsion.EconWP21004.LatestRevision.pdf https://faculty.sites.iastate.edu/tesfatsi/archive/tesfatsi/...

littlestymaar 2y ago
I love Primer, but this particular video has a fatal flaw which makes it converge to the same result as microeconomics: it considers seller's cost to be a marginal cost, which is zero when the rocket hasn't been sold and is paid when the rocket is sold. But that's absolutely not how real world market works, and a multi-agent simulation which has the ability to use different hypothesis (upfront costs) should definitely do so, because then we'd see a completely different result.

jszymborski 2y ago

I wonder how those plots were made, they're neat. GNUplot?

heromal 2y ago
Looks like pure ebiten. https://github.com/JasonFantl/Simulated-Economy-Tutorial/blob/master/1%2Feconomy%2Fgraphing.go https://github.com/JasonFantl/Simulated-Economy-Tutorial/blo...
- nivertech 2y ago
  Are there similar non-GoLang libs or CLI tools?

DeathArrow 2y ago

Just as in the real world we don't spend most time fighting between each other or some monsters, it would be nice to have a MMO that focuses mostly on economic activities. By that I mean producing goods services and trading.

RugnirViking 2y ago
its really hard to make something like that fun. The real world economy is driven on asymmetrical inefficiencies and lack of information, things that wikis and game balance pretty much destroy. It's only fun to make money on say world of warcraft because most people aren't also doing that. (but instead buy your goods and use them for something essentially unproductive in economy-terms) Even then it can feel pretty stupid given the amount of arbitrage bots people have set up, you have to focus on very niche opportunities or oversights by those arbitrage bots. Kinda like the real economy
tekla 2y ago
Eve Online?

admiralrohan 2y ago

This is very very interesting. Want to hear some of the behind-the-scenes stories. What was the initial scope and how did you break down the whole project? As it's very hard to wrap around the whole thing at once.

cookiemonsieur 2y ago

can the economy even be predicted ? Was it ever done to any successful degree in the past ? And if so, to what end ? I like the idea conceptually, but it doesn't seem to be good enough to halt economic disasters (or correction as we like to call them nowadays).

HPsquared 2y ago

Related: MONIAC, a 1949 analogue computer macroeconomics simulator, with water flowing through the machine representing money and spending etc. https://en.m.wikipedia.org/wiki/Phillips_Machine https://en.m.wikipedia.org/wiki/Phillips_Machine Short clip: https://youtu.be/beuseJ0Wm3M https://youtu.be/beuseJ0Wm3M Detailed demo: https://youtu.be/gkNaZJmii28 https://youtu.be/gkNaZJmii28

strstr 2y ago

The most interesting toy economy I’ve seen has been d2jsp and its “forum gold”. Forum gold is primarily used as a fiat currency for diablo 2 trading. It’s a janky digital currency on a janky forum from like 20ish years ago, that’s still alive today. You can technically buy the currency from the forum, but in practice few do that. Most people just trade items to bootstrap. Having futzed with bartering in diablo (and non-fiat trading denominated in items of stable value), I quickly came to appreciate fiat currency. Being able to combine two “half trades” into an equivalent barter exchange is vastly easier. At one point I was able to trade some of the forum gold I accumulated from diablo 2 for a “perfect IV foreign Ditto” for shiny pokemon breeding.

littlestymaar 2y ago
The funniest thing is that d2jsp was originally the forum of a bot developer. Looks like bot runners where the one the most in need of a currency to make trades more efficient.

vannevar 2y ago

This is not so much a model economy as it is a model market. But still interesting to see the dynamics that emerge from even an algorithmically simple model when you have multiple agents interacting over time. For even a simple economy, I think you'd need to simulate money directly, and include the notions of rent and work.