Economic Simulation Theo Gutman-Solo

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

How to achieve this? Integrate current economic theories Elementary Macroeconomics Paul Krugman’s New Trade Theory Joseph Stiglitz’s theories on asymmetric information Agent-based modeling display on rectangular cartograms

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

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)

Methodology - Modeling Agents Represent Business Contain countries of Production Incorporation Marketing Countries Contain CPI GDP Languages Java C++

Heuristic Incorporation Production & marketing 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

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

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.

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

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

Sample Wealth Flow Business Country of Marketing Country of Production Country of incorporation Country for investment