This makes me wonder if it's possible to create a real-life simulation video game where you can study the economic effects of policies and make better decisions in real life.
no its not possible, and that is the great hubris of many economic planners. They wind up creating simulations that just enforce their bias (because they write code that assumes their biases).
you would literally be trying to model every individual's decisions.
here's simple test: try to predict the stock market -- this is essentially what you are asking (the stock markets can be rigged and it wouldn't matter for this test to be useful because that is actually part of the prediction).
> They wind up creating simulations that just enforce their bias (because they write code that assumes their biases).
Agreed, such simulations can not be used to answer specific questions. Same thing also goes for weather / climate models, not just human economy.
> try to predict the stock market -- this is essentially what you are asking
No, it is not what they are asking. Mistake here is confusing what is called microstate and macrostate [0] in statistical mechanics.
E.g. yes you can not predict the path an individual gas molecule will take around a driving vehicle because it is a highly chaotic system [1]. And the same goes for individual stocks at a specific time. However, that does not mean that air flow simulations are not possible or useless, quite the opposite.
I assume he's talking about an agent model from his description, in which case it is exactly trying to derive the macro economy from the micro decisions.
This is a very classical approach. The idea that macro economy follows different models than the micro is somewhat modern. For example this caused a huge crisis in Keynesian economics in the 1970s where inflation models and the Phillips curve were drastically different than predictions and was a factor in the development of New Keynesian theories.
The examples you give aren't about individual micro prediction not agreeing with the macro, but that's the case you can come across in various economic theories where is there is a literal disconnect the two and correct micro equations disagree with the macro equations.
I sometimes play with this thought as well, and I think we will see more of it as AI technologies allow for more realistic behavior of virtual agents.
The reason why I think having virtual agents instead of real players is important is because real players are not invested enough. They can always switch to a different reality whereas virtual agents are stuck and have to live with the consequences of their actions. That does change the dynamics a lot.
"men still are men and not the keys of a piano, which the laws of nature threaten to control so completely that soon one will be able to desire nothing but" - Fyodor Dostoevsky
Depends on what “possible” means. A simulation can never faithfully recreate what it simulates. Can it simulate 1% or 0.01 of reality?
Maybe it simulates 2% of reality but the programmers (being natural reductionists) think that it is 80%. Now the the decision makers can wreck havoc with the pseudo-learnings from the simulation.
I know someone trying to do this as a side project actually! It's extremely difficult though because this emulation will never quite reached the fidelity of the real world. It always needs to be a game first - used to explore rather than prescribe.
It's always possible to model a system on a computer, the question is what assumptions you take. We don't have a perfect model of human behavior or even much consensus on how humans behave, so your assumptions are going to drive your results
Obvious evidence of this can be seen by the Fed actions the past few years and the disastrous consequences. Some of the smartest economists in the world work for the Fed and still made huge errors.
Saying that human nature in the absence of societal pressures is the true human nature is questionable
We are social animals, taking us out of an environment where we're part of and accountable to a community is our true nature is like taking a fish out of water to study its true behavior
While I don't think we live inside a simulation or that there is an outside,
you might enjoy the book Simulacron-3 [0] or its movie adaptation Welt am Draht [1]. It is about the protagonist realizing that they are an agent in an economic computer simulation.
