Using Simulations in Economics

Economics as a discipline is tailor-made for instructional simulations.

  • Economists use simulation techniques to conduct professional research.
  • Many models taught in upper-division courses can be structured as simulation models.
  • The ability to make abstract conclusions more concrete through simulation can benefit many economics students, particularly students who have a minimal mathematical background.

Four specific instructional goals can be addressed through instructional simulations:

  1. Teaching economic methodology through simulation. See, for example, MarketSim
  2. Making abstract economic models more accessible. See, for example, General Equilibrium for Microeconomics
  3. Developing critical thinking skills using models. See, for example, Budget Explorer
  4. Supporting sampling methods in statistics and econometrics. See, for example Basic Monte Carlo Simulation for Beginning Econometrics
In considering instructional simulations for your courses, it is important to understand that the foundation for including instructional simulations already exists in many economics courses. For example, an instructor using a simulation in an intermediate macroeconomics economics course would devote considerable class time to explaining the specific structure assumed by the simulation. In the absence of the simulation a general discussion of macroeconomic modeling would still be included in the course.

Finally, the mathematical model that powers a simulation is sometimes captured by a spreadsheet. Role playing behavior is often called a game, and experiments are often based on game designs. This means that the same instructional example may be described as a simulation, a game, or an experiment, depending on the context.

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