Our simulation uses the Aggregate Supply-
Aggregate Demand (AS-AD) model to determine
price level based on supply and demand. This model
is used to track taxation, spending, investing and
debit. Basically, the price for goods is calculated as
an aggregate of consumption, investment and
government spending.
To track long term change in an economy’s
output, we use the Solow-Swan Growth Model
(Donghan et al., 2014). The economic output in this
model is determined as an aggregate of technology,
labour, productivity and capital stock. Capital stock
change is in turn calculated by a set of different
equations, relating population and capital growth.
2.2 Game AI
In this section, we briefly summarize the AI
approaches used in our simulation. While game AI
borrows techniques from the academic AI literature,
there is a distinct approach that requires distinct
methods. In particular, the goal in game AI is
generally to simulate intelligent characters, rather
than to simulate human reasoning; as such there are
particular tools and approaches that tend to be
implemented and used widely. The AI techniques
described in this section are all standard approaches
in game development, described in more detail in
(Millington, 2019).
The first three approaches are essentially based on
rules. First, we use a classic rule-based system, in
which economic rules based on expert knowledge are
defined. These are simple if-then rules, where we
keep track of knowledge base that changes as
antecedents are triggered. This framework then
dictates the actions that the AI should take to grow the
economy. The second approach is similar, but it uses
fuzzy logic in reasoning about the rules. In other
words, the rules are based on fuzzy concepts with
degrees of truth rather than classical logic (Köse,
2012). The third approach to AI employs goal-based
behaviour, where the AI has explicit goals and actions
rather than simple rules. This approach permits
reactive planning in the classical sense of (Georgeff
and Lansky, 1987). The advantages of this approach
have been discussed in (She and Grogono, 2009).
The last approach to AI used in our simulation is
Machine Learning (ML). Specifically, we use
regression to learn the relationships between
dependent variables based on past information. In this
simulation, we actually use a combination of linear
regression, Gaussian regression, and Sequential
Minimal Optimization regression (SMOreg). In the
present work, we use the Weka framework to
implement the ML agent (Frank et al., 2016).
3 ECONOMIC SIMULATION
3.1 Overview
Our software is a game that includes an interactive
macroeconomic simulation. The simulation can be
controlled by a human player, or by an AI agent. The
objective is not only to produce a playable game, but
also to provide a useful testing environment for
experimenting with economic policies. At the same
time, we wanted to determine if standard game AI
approaches can operate the simulation more
effectively than a human player.
A number of variables are simulated. Broadly
speaking, the primary ones are:
● Debt
● Economic Output
● Taxation
● Government spending
● Public investment
● Public consumption
● Technology
The idea of the game is to maximize the economic
growth of your economy while keeping debt under
control.
There are two separate “debts” simulate in our
platform: government debt and public debt.
Government debt is determined by taxation and
spending; if players spend more than they are taking
in from taxes, government debt must increase. Public
debt is a bit more complicated. Public spending
depends on the interest rate, which depends on the
money supply; a higher money supply means a lower
interest rate and therefore more spending. The money
supply itself is determined by owned bonds divided
by the reserve requirement. In order to increase public
spending, the player must either increase the money
supply or decrease the reserve requirement. Public
income cannot be directly changed; it is determined
as a percentage of output. As is to be expected, if
spending exceeds income, public debt is incurred.
Debt is automatically paid back periodically,
being subtracted from spending, and it must be paid
back with interest. The interest is determined by how
large the debt is; higher debt means a higher interest
rate.
The other important variable is technology. This
is what will increase our long term economic output.