Economic Simulation

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Economic Simulation

• Theo Gutman-Solo

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The aim of this study is to create an econometric
model to simulate global wealth flows
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How to achieve this?

• Integrate current economic theories
• Elementary Macroeconomics
• Paul Krugmans New Trade Theory
• Joseph Stiglitzs theories on asymmetric
  information
• Agent-based modeling display on rectangular
  cartograms

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Economic Assumptions

• Assumptions made in model
• Sum game
• Productivity and wealth is relative resulting in
  a sum game and wealth cannot be created
• Bias towards supply demand
• Efficient Market
• Inaccurate assumption but required for complexity
  issues
• Minimal Transportation and procedural costs

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Methodology

• Generate random world
• Evolve world
• Each Timestep
• Business
• Choose stations of production and marketing
• Take money from marketing country and give money
  to country of production
• Difference (profit) is given to country of
  incorporation.
• Countries
• Reevaluate status (GDP, CPI)

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Methodology - Modeling

• Agents
• Represent
• Business
• Contain countries of
• Production
• Incorporation
• Marketing
• Countries
• Contain
• CPI
• GDP

• Languages
• Java
• C

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Heuristic

• How countries choose locales of production,
  incorporation, and marketing

• Incorporation
• Random, assigned at creation of world
• Production marketing
• Each timestep weights countries by potential
  profit and chooses best combination

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Methodology - Display

• The issue
• The code generates immense amount of data.
• Resolution show real time evolution of country
  wealth using cartograms

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Cartograms

• Cartograms are maps in which country size is
  dependent on a particular variable. They are used
  as an efficient method to communicate information
  on relative country data
• In this project a rectangular cartogram scaled to
  GDP will be used.

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2nD Quarter Developments

• Problems
• Random Skews in nation wealth
• Error in evaluation process
• Bias towards supply and Demand
• Model lacks stable country development
• Causes inordinate fluctuations
• Solutions
• Integrate new trade theory
• Dynamic business agents

• Scenario
• I began accumulation of data to be able to make
  model based on real world statistics rather than
  randomly generated world

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Possible Future Developments

• Economic
• Incorporation could be skewed to wealthier
  nations
• Include liquidity bias scalar
• Movement of production of marketing should not be
  instant
• Include mergers, acquisitions and conglomerates
  in agent action.

• Programming
• Agent setup is quite wasteful, changing
  information storing procedure could allow for
  more accurate simulation