For some time, I have been curious as to anybody attempting to develop computer models to test different economic theories. In light of recent advances in computing, models have been developed to help predict, though not precisely, hurricane paths, and even how stars formed.
Sure, it would be extremely complicated in terms of its input variables, but perhaps for a given specific economic situation, the model may give a short term success score vs a long-term success score for a given economic theory.
What am I trying to get at with all this? Party choice. Objectively speaking from an economic standpoint and altogether avoiding other political issues, it would be a tool to determine which economic theory to apply for a given situation.
Taking the next leap would be to vote for the political party that is most sympathetic to that economic theory. For example, voting for a more-Keynessian Democrat vs a less-Keynessian Republican.
I am not an economist and personally, I have already made a party choice, but for those who are still undecided and needed some sort of "proof" that one economic theory is better than the other would help in convincing undecided voters. If there's no such computer model, what link would you send as "proof" for undecided voters who want to choose the party with the best economic plan?
Considering that the Federal government is in a position to "maximize employment, production, and purchasing power" according to the Employment Act of 1946 - How do they know that they are applying the best economic practices for the given economic situation? Do they have sufficient evidence from computer models?
Here's the link to a good article on this chap. He has an impressive track record of predictions.
If anyone can model human intrigue then just about anything can be modeled...
http://www.goodmagazine.com/section/Features/the_new_nostradamus
Coming from an engineering background, I thought of plasma physics. The billion-dollar 40 year history of failure to achieve fusion's plagued by the same difficulties as modeling economic systems.Just doing a few hours of research, with my economic knowledge limited to a couple basic Austrian theory books, I found the method I had in mind already in use:"Agent-Based Computational Economics" (ACE) http://en.wikipedia.org/wiki/Agent-Based_Computational_Economics
ACE is based on relations of programming agent-objects' methods and attributes, like the popular Cellular-Automata "Game of Life". I see there are simple examples of trader-agents which would need much more elaborate, personality and emotional detail to model reality. And since real people's do myriad unrelated events (selling a pet-food stock because a dog bite, etc). A predictive model would need immense trivial detail. And as in chaos, there's emergence of markedly new dynamics at increasing scales of social order (e.g. family, village, state, nation, world). In plasma-physics the particle-in-cell approach is assumed to practically realize an approximation.
Perhaps its possible to technically depict, if not predict, as others have noted here, specific events by selecting specific parameters at each scale of organization?At the risk of changing the subject, this model could depict the Austrian approach and the error of trusting central-planners to the public, as the Hake's simplistic Return-To-Serfdom cartoon once was, but now using the latest video-game 3D rendering (something like the "Nightmare Before Christmas", etc). It would give students a fun video-game model to play with as scenarios are re-enacted with changing parameters. It would be a game like the popular "Civilization", but with useful economic and historical realism.There's a website, Sourceforge, where such a project could be started (if its not going on already). I suspect the theoretic talent I certainly lack is here. There's a large community of video-game modders that could hopefully be tapped for the artistic talent to add the artwork to already-existing games. I suspect the technical time and effort required for fine-tuning the model would scare off any commercial, if not academic interests, however.
Suggestions?
baoinvestor: I have a problem with accepting the notion that there is physical phenomena that cannot be expressed through mathematics. Perhaps we have yet to evolve our eloquence in math to describe macro-economics, but if we can try and model the uiverse through math then I don't think economics is beyond the stars...
I have a problem with accepting the notion that there is physical phenomena that cannot be expressed through mathematics. Perhaps we have yet to evolve our eloquence in math to describe macro-economics, but if we can try and model the uiverse through math then I don't think economics is beyond the stars...
Then you need to read Physician-Mathematician-Computer Scientist Stephen Wolfram's treatise on science, because he shows exactly why most physical phenomena cannot be expressed through mathematics.
Shortly said, there is only a very small part of the universe that can be modelled with mathematics.
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Perhaps because it is irrelevant to pure economics. I don't disagree that modelling has its uses (such as putting the ABCT in terms modern economists better understand), but Austrians have sound reasons for rejecting the neoclassical paradigm, which confuses "modelling" for sound theorizing (which is more the fault of its blind obedience to the hypothetico-deductive methodology than anything else.) That said, maybe Austrians with sound theory behind them could put the models to better, more correct uses.
-Jon
To darkness I condemn you...
scottxs:Just doing a few hours of research, with my economic knowledge limited to a couple basic Austrian theory books, I found the method I had in mind already in use:"Agent-Based Computational Economics" (ACE) http://en.wikipedia.org/wiki/Agent-Based_Computational_Economics At the risk of changing the subject, this model could depict the Austrian approach and the error of trusting central-planners to the public, as the Hake's simplistic Return-To-Serfdom cartoon once was, but now using the latest video-game 3D rendering (something like the "Nightmare Before Christmas", etc). It would give students a fun video-game model to play with as scenarios are re-enacted with changing parameters. It would be a game like the popular "Civilization", but with useful economic and historical realism.
At the risk of changing the subject, this model could depict the Austrian approach and the error of trusting central-planners to the public, as the Hake's simplistic Return-To-Serfdom cartoon once was, but now using the latest video-game 3D rendering (something like the "Nightmare Before Christmas", etc). It would give students a fun video-game model to play with as scenarios are re-enacted with changing parameters. It would be a game like the popular "Civilization", but with useful economic and historical realism.
There were these 2 links I found from your link that had a lot of resources to start learning more:
Society of Computational Economics --- http://comp-econ.org/
Agent-Based computational Economics --- http://www.econ.iastate.edu/tesfatsi/ace.htm
I agree that such an Austrian modeling game would be fantastic to help convince others, or at least to help communicate theory in a way that is more accessible to people. I also tend to be the "don't tell me, but show me" type when it comes to learning something new.
Developing an open source project in SourceForge is a good idea too, for the graphics and gaming environment development, wouldn't be difficult to seek volunteers. Now if only somebody like Bruce Bueno de Mesquita was willing to design and test the models according to Austrian theory . . . Hmmm . . .
Jon Irenicus:I'm not a Kantian so I do not agree with how Mises phrased/argued his position, for the most part, and I think Austrianism has an "empirical" element in the sense Rothbard conceived of it, namely in its concept-formation and retroactive control over its axioms (as Smith puts it), but that is nowhere near endorsing the hypothetico-deductive methodology or abandoning Mises. "Dogmatic" my ass...
Would you mind expanding on this a bit more or pointing me towards something that does? Perhaps something in Rothbard's writings that shows how he's different from Mises?
I followed several of the links at http://www.econ.iastate.edu/tesfatsi/ace.htm before I posted here. After reading a decument about ACE from there, I did a search here at mises.org to see if anything was hear about modeling and found this thread.
Econ is a new interest for me, an offshoot of politics, having just finished Ron Paul's "Revolution" reading list and gotten "What government has done to our money", and indeed in great part, having my representatives do that 700 Billion bailout after so many of us protested, then watching the system melt down.
Oh the joy of repeatedly watching Bush, Paulson and Bernanke repeatedly attempt to reassure us, then seeing the market drop hundreds of points! THAT'S MORAL HAZZARD!!!
Any why any modeling program must account for zeitgeist, greed, corruption, honesty, altruism, patriotism, disaffection, indifference in the economy, its actors and influences.
But I digress. I suspect before too long, there will be lots of students and professionals with a lot of time on there hands, asking "what happened to us? [:'(]", finding places like this, finding out the truth, and available for action!
Rothbard wrote far too little on this, but I would direct you in the direction of Geoffrey Plauche's paper on Aristotelianism and apriorism and Long's paper on non-precisive abstraction (I forget its title) and Barry Smith's writings on the LVMI site.
Jon Irenicus: Rothbard wrote far too little on this, but I would direct you in the direction of Geoffrey Plauche's paper on Aristotelianism and apriorism and Long's paper on non-precisive abstraction (I forget its title) and Barry Smith's writings on the LVMI site. -Jon
Thanks for the help.
This topic has always fascinated me. I think building accurate models could be very important in promoting freedom, not to mention the potential money you could make in the marketplace.
I'll have to check out some of the links that were posted on this thread, but I think it's nearly impossible to effectively model the economy as a whole right now. I just don't think the technology's there to model the human thought process to the extent that would be needed for an all-encompassing economic model. You could create a model based on various statistical measures but I think that approach is fundamentally flawed if you believe that the mechanics of individuals making exchanges is the essence of the market. I could write a very reasonable looking program right now that could "prove" central planning works based on economies of scale, reduced customer acquisition cost, etc.
I think models that are very narrow in scope might be the way to go; ones that demonstrate a specific aspect of our overall system. These "mini" models would still be based on individual actors, but they might only have a single decision point. This would make the model much easier to build and understand. One example I can think of was in Dawkins' "Selfish Gene". It's been a while since I read it but, in short, the actors could choose to screw each other over or cooperate and there were different payouts for each combination of actions. If you're familiar with the prisoner's dilemma, it's basically a version of that, but repeated many times. The model showed that aggression doesn't pay in the long run, which is a good demonstration of the non-aggression principle.
Maybe after many mini models are demonstrated as being accurate, they can be integrated into larger models, and then those larger models integrated with each other and so on. Advancements in technology should also help move this process along.
http://www.mises.org/story/3101
It's always nice to see my intuitions confirmed by an expert.
True "AI" in computer models has not yet been achieved in the computer sciences. Most computer models are based on historical data. As we all know the historical view point on the the success or failure of economic history can very greatly from historian to historian. For this reason a true and accurate computer model would not be possible at this time. We can not get intelligent economists to agree on whether the Keynesian economics that FDR implemented to get us out of the Great Depression help of hurt our economy. This does not even take human greed into consideration. For this reason I do not feel an ubiased computer model would be possible.
There is only one good, knowledge, and one evil, ignorance - Socrates
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