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Monday, July 07, 2008

Computer Simulation of the Economy?

OK I posted this to a listserv but (as usual with those things) most people are answering a question that is only 70 - 86% related to my initial inquiry. I reprint it here, so that you people too may choose to talk about matters that don't really answer my question.

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Lately I have been thinking that the best way to get across
spontaneous order, as well as illustrate the Austrian Business Cycle
Theory, would be to have a computer simulation of the economy. E.g.,
it would illustrate the planning problem by showing a sphere (with
farmland, ore deposits, trees, etc. distributed on it) and then slowly
adding more people and more production processes. It would get across
the Mengerian structure of production because the animation would slow
way down and zoom in one a farmer (or coal miner), and explain how
this was the highest stage. Then the camera would follow the piece of
coal around and see its life history.

(But actually it would start out with a Crusoe economy. Only when you
were way into the simulation would you be ready to have the computer
add a production process that involved coal.)

So if it were done well, I think it could be a fascinating
presentation / tutorial. It could point out to the reader how each
new process draws on the outputs of some of the pre-existing ones.
E.g. once the automobile is introduced, then we see the impacts on the
oil extracting people in later elapsed time.

And throughout the whole thing, maybe in the corner there would be a
tally of how many people were now in the simulation, and how many
different products were being produced, and how many resources (in
their various natural units) were being used each period.

The point would be to keep economics totally out of it in the
beginning. You wouldn't be watching "trade flows" and estimating
"total GDP." You would just be watching an amazing construction of an
incredibly complicated operation involving (ultimately) billions of
people, and literally tons of resources getting extracted and then
altered by millions of different people as they are transformed into
everyday products like toothbrushes and DVDs.

Only after the viewer is blown away by how tremendously complex and
fragile this arrangement is, does the narrator then drop the bomb that
a market economy coordinates all this (and deals with tsunamis, deaths
of key personnel, etc.) so rapidly that we don't even notice it
happening.

Any thoughts on (a) whether this would be useful and (b) how much it
would cost to develop?

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