January 11, 2017

Simulations as Test Environments

Today, the top post of hacker news was an artificial intelligence steering a car in the computer game Grand Theft Auto V. This is a great illustration of the power of simulations: even if not entirely realistic, they can provide an excellent test environment - in this case for testing the Deep Drive self-driving car AI.

You can see the artificial intelligence in action in this video. The small screen at the top left is what it “sees” and on the big screen you can see how it drives.

Similarily, it would make sense to construct a test environment for economic theories and for testing the behavior of economic agents. In macroeconomics, this might even be the only way to actually perform large-scale experiments.

“In using systems of adaptive agents to create a ’guess’, we are counting on the tendencies of these systems of adaptive agents, as plodding as they are, eventually to find their ways to equilibria that we economists (who, after all, made up the model!) have difficulty finding.”
Thomas Sargent in 'Bounded Rationality in Macroeconomics'